Consider a firm that has a Weighted Average Cost of Capital of 14%, who has two mutually exclusive capital budgeting projects to consider. Find the Net Present Value and the Internal Rate of Return and indicate which one(s) you would choose.

Project 1:

CF0 = -6m

CF1 = 2m

CF2 = 2m

CF3 = 2m

CF4 = 2m

CF5 = 2m

Project 2:

CF0 = -18m

CF1 = 5.6m

CF2 = 5.6m

CF3 = 5.6m

CF4 = 5.6m

CF5 = 5.6m

Group of answer choices

Project 1: NPV = 0.866m; IRR = 19.86%

Project 2: NPV = 1.225m; IRR = 16.8%

Choose Project 1 because the IRR is higher

Project 1: NPV = -0.17; IRR = 12.59%

Project 2: NPV = -1.68m; IRR = 9.36%

Choose neither because they have negative NPVs.

Project 1: NPV = 0.866m; IRR = 19.86%

Project 2: NPV = 1.225m; IRR = 16.8%

Choose Project 2 because the NPV is higher

Project 1: NPV = 6.86m; IRR = ??

Project 2: NPV = 19.2m; IRR = ??

Choose Project 2 because the NPV is higher