Your boss has entrusted you to analyze the information available regarding cash flows for two mutually exclusive projects and has asked for you to indicate which of the projects is the better option for the firm. The cost of capital of the firm is WACC of 9%:

Project A Project B Initial Investment -$300,000 -$400,000 CF year 1 $105,000 $60,000 CF year 2 $105,000 $90,000 CF year 3 $105,000 $100,000 CF year 4 $105,000 $120,000 CF year 5 $105,000 $300,000

a) Which project valuation model (Net Present Value, Internal Rate of Return, Payback Period) always leads us to the optimal solution when it comes to mutually exclusive projects? Explain why.

b) Use the method you chose in (a) and calculate the result for both projects showing the formula and your computed result.

c) Which project is better according to your calculations in (b)? Explain your answer.

Your boss has entrusted you to analyze the information available regarding cash flows for two mutually exclusive projects and has asked for you to indicate which of the projects is the better option for the firm. The cost of capital of the firm is WACC of 9%; Project A Initial Investment S300,000 CF year l CF year 2 CF year 3 CF year 4 CF year 5 S105,000 $105,000 S105,000 S105,000 S105,000 Project B $400,000 S60,000 $90,000 $100,000 $120,000 S300,000 Which project valuation model (Net Present Value, Internal Rate of Return, Payback Period) always leads us to the optimal solution when it comes to mutually exclusive projects? Explain why a) b) Use the method you chose in (a) and calculate the result for both projects showing the formula and your computed result. c Which project is better according to your calculations in (b)? Explain your