For the given cash flows below, assume the cash flow is the same in the next 2 years. Compute the NPV for each project, and compute the incremental IRR. Compare and explain why NPV always gives the correct decision. Project Initial Investment Year 1 Cash Flow A500,000 125,000 B500,000 120,000

In what ways can the IRR make you give a flawed decision and what relationship the NVP have with the IRR?

What is the best way to select a project that has resource restrictions? Explain.

Why must opportunity costs be included in cash flows, while sunk costs and interest expense must not?

Compare and contrast the uses of break-even analysis and sensitivity analysis in evaluating project risk.