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You are choosing between two projects. The cash flows for the projects are given in the following table (5 million): Project Year 0 Year 1
You are choosing between two projects. The cash flows for the projects are given in the following table (5 million): Project Year 0 Year 1 - $51 $27 B - $100 $21 a. What are the IRRs of the two projects? b. If your discount rate is 5.2%, what are the NPVs of the two projects? c. Why do IRR and NPV rank the two projects differently? Year 2 $20 $39 Year 3 $20 552 Year 4 $13 $62 The IRR for project Ais%. (Round to one decimal place.) The IRR for project B is %. (Round to one decimal place.) b. If your discount rate is 5.2%, what are the NPVs of the two projects? If your discount rate is 5.2%, the NPV for project A is $million. (Round to two decimal places.) If your discount rate is 5.2%, the NPV for project B is 5 million. (Round to two decimal places.) c. Why do IRR and NPV rank the two projects differently? (Select from the drop-down menus.) 'NUP/IBR NVPline Vis measuring return on investment. Because returns do not scale with different levels of NPV and IRR rank the two projects differently because they are measuring different things. Vis measuring value creation, while investment, the two measures may give different rankings when the initial investments are different. Enter your answer in each of the answer boxes
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