You have two potential investment projects, Project A and Project B. You can take one, but not both. The annual cash flows for the two projects are:

Year0123

Project A Cash Flow:-$50,000$45,000$5,000$5,000

Project B Cash Flow:-$50,000$5,000$5,000$50,000

(a)Compute the IRR for each project:(Show results to two digits.)

IRR ofA _______percent

IRR of B________percent

(b)Computethe NPV for each project if the appropriate discount rate is 5%.

NPV of A$_______

NPV of B $_________

Which project would you take, and why?

(c)Computethe NPV for each project if the appropriate discount rate is10%.

NPV of A$_____

NPV of B$ ______

Which project would you take, and why?

(d)Summarize the principles demonstrated by this problem.