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    Consider the following project cash flows: compute NPV vs. IRR

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    Consider the following project cash flows

    Year Project A Project B
    0 investment -$200 -$300
    1 60 200
    2 70 100
    3 80 100
    4 80

    1. Calculate the NPV of each project. Which project should be chosen if opportunity cost is 11%?
    2. IRR. What are the internal rates of return on projects A and B?

    Please show all computations.

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    Solution Preview

    Please find calculations in the attached excel sheet.

    1) Project B should be ...

    Solution Summary

    The solution shows the formula and calculates the answer with further narrative explanation.