Question
You are considering the following two projects and can take only one. Your cost of capital is 11.0%. The cash flows for the two projects
You are considering the following two projects and can take only one. Your cost of capital is 11.0%.
The cash flows for the two projects are as follows ($ million):
| Project | Year 0 | Year 1 | Year 2 | Year 3 | Year 4 |
| A | $100 | $25 | $30 | $40 | $50 |
| B | $100 | $50 | $40 | $30 | $20 |
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?
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Energy And Finance Sustainability In The Energy Industry
Authors: André Dorsman, Özgür Arslan-Ayaydin, Mehmet Baha Karan
1st Edition
3319322664, 978-3319322667
