Question
Fresh Fruits is considering two equally risky, mutually exclusive projects, Projects A and B, that have the following cash flows: a. What is the cost
Fresh Fruits is considering two equally risky, mutually exclusive projects, Projects A and B, that have the following cash flows:
a. What is the cost of capital that would make the two projects have the same NPV values?
| Year | Project A | Project B |
| 0 | -$100,000 | -$97,000 |
| 1 | 60,000 | 30,000 |
| 2 | 25,000 | 15,000 |
| 3 | 60,000 | 80,000 |
| 4 | 40,000 | 65,000 |
b. Thoroughly discuss why the 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?
Please do not copy-paste previous answers.
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The Oxford Handbook Of Private Equity
Authors: Douglas Cumming
1st Edition
0195391586, 978-0195391589
