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You are choosing between two projects. The cash flows for the projects are given in the following table ($ million): Project Year 0 Year 1
You are choosing between two projects. The cash flows for the projects are given in the following table ($ million): Project Year 0 Year 1 A - $50 27 -S102 $19 a. What are the IRRs of the two projects? b. If your discount rate is 5.3% what are the NPVs of the two projects? c. Why do IRR and NPV rank the two projects differently? Year 2 S20 $41 Year 3 S18 S49 Year 4 S17 S62 a. What are the IRRs of the two projects? The IRR for project Ais%. (Round to one decimal place.) The IRR for project Bs%. (Round to one decimal place.) b. If your discount rate is 5.3%, what are the NPVs of the two projects? If your discount rate is 5.3%, the NPV for project Ais $7 million. (Round to two decimal places.) If your discount rate is 5.3%, the NPV for project Bis $ million. (Round to two decimal places.) c. Why do IRR and NPV rank the two projects differently? (Select from the drop-down menus.) NPV and IRR rank the two projects differently because they are measuring different things two measures may give different rankings when the initial investments are different. is measuring value creation, while is measuring return on investment. Because returns do not scale with different levels of investment, the
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