How do mutually exclusive projects compare to independent projects? Can NPV and IRR give conflicting results on occasion? Provide an example to illustrate.© BrainMass Inc. brainmass.com October 25, 2018, 10:02 am ad1c9bdddf
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.
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?
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