Question
Sexton Inc. is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and not repeatable. If
Sexton Inc. is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and not repeatable. If the decision is made by choosing the project with the higher IRR rather than the one with the higher NPV, how much value will differ? Hint: 1) use IRR criteria to choose the correct project, and then calculate the NPV of that project. 2) use NPV criteria to choose the correct project. 3) find out the difference in NPVs (i.e. NPV of project chosen by IRR criteria - NPV of project chosen by NPV criteria). WACC: 9.50% 0 1 2 3 4 CFS -$2,050 $750 $860 $890 $680 CFL -$4,300 $1,500 $1,800 $1,336 $1,554 Group of answer choices -$188.91 -$228.58 $0 -$226.70 -$166.53
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