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Cash Flows for Two Mutually Exclusive Projects: NPV versus IRR

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Here are the cash flows for two mutally exclusive projects:

Project A: Co : -20,000 C1: +8,000 C2: +8000 C3: +8000

Project B: C0: -20,000 C1: 0 C2: 0 C3: +25,000

a. At what interest rates would you prefer project A to B?

b. What is the IRR of each project?

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Solution Summary

The solution discusses cash flows for two mutually exclusive projects - NPV vs. IRR.

Solution Preview

To answer part a we need to find that discount (interest) rate at which the NPV's of both the streams ...

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