Project Evaluation

A company is considering two projects with the following details:

Project A:

• Initial investment: $15,000
• Cash flows: $5,000 per year for 4 years

Project B:

• Initial investment: $15,000
• Cash flows: $6,000 in year 1, $4,000 in year 2, $4,000 in year 3, $5,000 in year 4

The required rate of return is 8%.

Requirements:

1. Calculate the NPV of both projects.
2. Determine the IRR of both projects.
3. Identify which project is more favorable.
4. Perform a sensitivity analysis with a required rate of return of 10%.