Question 2 [15]

Total Limited is evaluating the feasibility of two possible projects. It cannot do both they are mutually exclusive. The cash flows are:

Point in time (yearly)	Project A	Project B
0	-420 000	-100 000
1	150 000	75 000
2	150 000	75 000
3	150 000	0
4	150 000	0

2.1. Calculate the internal rate of return (IRR) for each project. (5)

2.2. Calculate the net present value (NPV) for each project. (5)

2.3. Compare and explain the results in (2.1) and (2.2) and indicate which project the company should undertake and why. (5)