The Box Company was confronted with the two mutually exclusive investment projects, A and B, which have the following after-tax cash flows:

Cash Flows, per Year ($)

Project 0 1 2 3 4

A (12,000) 5,000 5,000 5,000 5,000

B (12,000) Nil Nil Nil 25,000

Based on these cash flows:

(a) Calculate each projects NPV and IRR. (Assume that the firms cost of capital after taxes is 10 percent.)

(b) Suggest to the management as to which project to be chosen based on the IRR criterion.

(c) Evaluate the rankings given by the NPV and IRR methods