The first project has a positive NPV of NPV = $50,000 +

−$250,000 1.25

+ $467,500 1.252

+

−$387,500 1.253

+ $120,120 1.254

≈ $1.15 The second project has an NPV of −$1.15. You should take project A, but not B. If you plot the NPV as a function of the interest, you will see that there are multiple IRRs for these projects, specifically at 10%, 20%, 30%, and 40%. With a cost of capital of 25%, you cannot easily determine which of these two projects you should take. Make your life easy, and just use NPV instead.