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You are considering the following two projects and can take only one. Your cost of capital is 11.4%. The cash flows for the two projects
You are considering the following two projects and can take only one. Your cost of capital is 11.4%. The cash flows for the two projects are as follows (5 million): Project Year 0 Year 1 A - $102 $25 B - $102 $51 Year 2 $28 $40 Year 3 $40 $28 Year 4 $51 $22 a. What is the IRR of each project? . 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? 1. What should you do? a. What is the IRR of each project? The IRR for project Ais %. (Round to one decimal place.) The IRR for project B is % (Round to one decimal place.) . What is the NPV of each project at your cost of capital? The NPV for project A is $ million. (Round to two decimal places.) The NPV for project B is $ million. (Round to two decimal places.) . At what cost of capital are you indifferent between the two projects? You will be indifferent if the cost of capital is % (Round to one decimal place.) 1. What should you do? Given your cost of capital, which project would you choose? (Select the best choice below.) O A. You should invest in project A, as it has the higher IRR. O B. You should invest in project A, as it has the higher NPV. O C. You should invest in project B, as it has the higher IRR
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