The following projects are available to a firm with a discount rate of 10%:

• Project A
  • Cost: $200,000
  • Year 1: $70,000
  • Year 2: $80,000
  • Year 3: $90,000
  • IRR: 14%
• Project B
  • Cost: $180,000
  • Year 1: $60,000
  • Year 2: $70,000
  • Year 3: $80,000
  • IRR: 16%

a) Calculate the NPV of both projects.

b) Identify which project should be accepted based on NPV.

c) Discuss the limitations of using only IRR in project selection.