Your division is considering two investment projects, each of which requires an up-front expenditure of $25 million. You estimate that the cost of capital is 10% and that the investments will produce the following after-tax cash flows (in millions of dollars): Year Project A Project B 5 10 15 20 (1) What are the payback periods for the two projects? 1 2 3 4 (2) What are the IRRs of the two projects? 20 10 8 (3) If the two projects are mutually exclusive and the cost of capital is 5%, which project should the firm undertake? (4) If the two projects are mutually exclusive and the cost of capital is 15%, which project should the firm undertake?

Your division is considering two investment projects, each of which requires an up-front expenditure of $25 million. You estimate that the cost of capital is 10% and that the investments will produce the following after-tax cash flows (in millions of dollars): (1) What are the payback periods for the two projects? (2) What are the IRRs of the two projects? (3) If the two projects are mutually exclusive and the cost of capital is 5%, which project should the firm undertake? (4) If the two projects are mutually exclusive and the cost of capital is 15%, which project should the firm undertake