Economic Decision A firm is considering two projects, I and J. Project I requires an investment of $800 and generates cash flows of $450 for the next 2 years. Project J requires $800 and generates $500 in year 1 and $350 in year 2.

Requirements:

1. Calculate the IRR for both projects.
2. Determine the NPV at discount rates of 7%, 14%, and 21%.
3. Draw the NPV profiles for both projects.
4. Decide which project to accept if the cost of capital is 14%.