Question
Flint Fruits is considering two equally risky, mutually exclusive projects, Projects A and B, that have the following cash flows: Year Project A Project B
- Flint Fruits is considering two equally risky, mutually exclusive projects, Projects A and B, that have the following cash flows:
| Year | Project A | Project B |
| 0 | -$100,000 | -$100,000 |
| 1 | 60,000 | 30,000 |
| 2 | 25,000 | 15,000 |
| 3 | 60,000 | 80,000 |
| 4 | 40,000 | 65,000 |
(a). What is the cost of capital that would make the two projects having the same NPV values?
(b). Discuss why this cost of capital that would make two projects have the same NPV value would influence your decision to take project A or project B based on NPV versus IRR method?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Fundamentals of corporate finance
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan
10th edition
978-1260013955, 78034639, 978-0078034633
