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 negative $ 49 $ 27 $ 18 $ 18 $ 17
B negative $ 102 $ 20 $ 41 $ 48 $ 58
a. What are the IRRs of the two projects?
b. If your discount rate is 4.8 %, what are the NPVs of the two projects?
c. Why do IRR and NPV rank the two projects differently?
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School Finance A Policy Perspective
Authors: Allan Odden, Lawrence Picus
5th Edition
0078110289, 978-0078110283
