You are considering the following two projects and can only take one. Your cost of capital is

10.9%. The cash flows for the two projects are as follows ($ million):

Project	Year 0	Year 1	Year 2	Year 3	Year 4
A	$102	$26	$30	$38	$48
B	$102	$48	$38	$30	$18

a. What is the IRR of each project?

b. What is the NPV of each project at your cost of capital?

c. At what cost of capital are you indifferent between the two projects?

d. What should you do?

a. The IRR for project A is

()%.

(Round to one decimal place.)

The IRR for project B is

()%.

(Round to one decimal place.)

b. The NPV for project A is

$()

million.(Round to two decimal places.)

The NPV for project B is

$()

million.(Round to two decimal places.)

c. You will be indifferent if the cost of capital is

()%.

(Round to one decimal place.)

d. Given your cost of capital, which project would you choose?(Select the best choice below.)

A.

You should invest in project

A,

as it has the higher

NPV.

B.

You should invest in project

B,

as it has the higher

NPV.

C.

You should invest in project

A,

as it has the higher

IRR.

D.

You should invest in project

B,

as it has the higher

IRR.