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Your boss is deciding between two projects. The two projects are mutually exclusive, equally risky, and not repeatable. Their cash flows are shown below. Wilma

Your boss is deciding between two projects. The two projects are mutually exclusive, equally risky, and not repeatable. Their cash flows are shown below. Wilma thinks the IRR is the best selection criterion, but Wilbur is arguing for the NPV. If the decision is made by choosing the project with the higher IRR rather than the one with the higher NPV, how much, if any, value will be forgone, i.e., what's the chosen NPV versus the maximum possible NPV?

Cost of capital 8.25%
Year 0 1 2 3 4
Cfu -2225 1100 1200 200 200
Cfa -5400 1300 4450 1600 2800

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