Question
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 | Year 2 | Year 3 | Year 4 |
| A | $51 | $27 | $18 | $22 | $14 |
| B | $101 | $22 | $38 | $49 | $61 |
a. What are the IRRs of the two projects?
b. If your discount rate is 5.4%, what are the NPVs of the two projects?
c. Why do IRR and NPV rank the two projects differently?
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Fundamentals of Financial Management
Authors: Eugene F. Brigham, Joel F. Houston
14th edition
1285867971, 978-1305480742, 1305480740, 978-0357686393, 978-1285867977
