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?
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Principles Of Managerial Finance
Authors: Lawrence J Gitman, Chad J Zutter
7th Edition
0133546403, 9780133546408
