Question
C8 Q17 You are considering the following two projects and can take only one. Your cost of capital is 11.4%. The cash flows for the
C8 Q17
You are considering the following two projects and can take only one. Your cost of capital is 11.4%. The cash flows for the two projects are as follows ($ million):
| Project | Year 0 | Year 1 | Year 2 | Year 3 | Year 4 |
| A | $102 | $25 | $32 | $39 | $50 |
| B | $102 | $50 | $39 | $32 | $21 |
a. What is the IRR of each project?
b. What is the NPV of each project at your cost of capital?
c. At what cost of capital are you indifferent between the two projects?
d. What should you do?
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Financial Management
Authors: Rajiv Srivastava, Anil Misra
2nd Edition
0198072074, 9780198072072
