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Fiat, a big European firm, is deciding among two mutually exclusive investments in Italy. The two projects have the following cash flows: Project A Project
Fiat, a big European firm, is deciding among two mutually exclusive investments in Italy. The two projects have the following cash flows:
Project A Project B
Year Cash Flow Cash Flow
0 -50,000 -30,000
1 15,000 8,000
2 20,000 12,000
3 40,000 18,000
4 25,000 12,000
The companys weighted average cost of capital is 10 percent (WACC = 10%). What is the net present value (NPV) of the project with the highest internal rate of return (IRR)?
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