Question
You are considering the following two projects and can take only one. Your cost of capital is 11.5%. The cash flows for the two projects
You are considering the following two projects and can take only one. Your cost of capital is 11.5%. The cash flows for the two projects are as follows ($ million):
| Project | Year 0 | Year 1 | Year 2 | Year 3 | Year 4 |
| A | negative $ 100 | $ 24 | $29 | $42 | $52 |
| B | negative $ 100 | $52 | $42 | $$29 | $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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The Oxford Handbook Of Computational Economics And Finance
Authors: Shu-Heng Chen, Mak Kaboudan, Ye-Rong Du
1st Edition
0199844372, 978-0199844371
