2

23.1

1.Your company is considering two projects with the following cashflows:

 

Year 0

Year 1

Year 2

Year 3

Year 4
Project A

-70

20

30

40

10
Project B

-25

20

15

    
  1. The discount rate is 12%. What are the NPV's for the two projects? (4 pts.)

  2. If you had to commit to one project that you would repeat over the next 8 years, which one would it be? Show how you came to your decision. (5 pts.)

  3. Someone on your analysis team suggests using IRR to choose between the two projects. Explain why that would be a bad idea. (4 pts.)

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