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Capital Budgeting: Mutually Exclusive, Independent

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How do mutually exclusive projects compare to independent projects? Can NPV and IRR give conflicting results on occasion? Provide an example to illustrate.

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Solution Summary

This solution answers questions regarding when NPV and IRR rules will be in conflict regarding selection of projects. Use the concept of NPV profile and crossover rate to illustrate the point.

See Also This Related BrainMass Solution

Capital Budgeting - NPV Function

Projects SS and LL have the following cash flows:

WACC = r = 10%
0 1 2 3
SS -700 500 300 100
LL -700 100 300 600

If a 10% cost of capital is appropriate for both of them, what are their NPVs?

See attached.

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