You have two mutually exclusive projects with the following cash flows:

• Project A:
  • Initial Investment: -$6,000,000
  • Year 1: $2,000,000
  • Year 2: $2,500,000
  • Year 3: $3,000,000
  • Year 4: $3,500,000
• Project B:
  • Initial Investment: -$4,000,000
  • Year 1: $1,000,000
  • Year 2: $1,500,000
  • Year 3: $2,000,000
  • Year 4: $2,500,000

Requirements:

a. Estimate the NPV of each project at a discount rate of 10%. b. Determine the Internal Rate of Return (IRR) for each project. c. Identify which project should be selected based on NPV. d. Discuss the sensitivity of each project's NPV to changes in the discount rate.