Question

You are choosing between two projects. The cash flows for the projects are given in the following table​ ($ million):

Project	Year 0	Year 1	Year 2	Year 3	Year 4
A	−$51	$$25	$21	$22	$16
B	−$98	$18	$41	$52	$58

a. What are the IRRs of the two​ projects?

b. If your discount rate is 4.9%​, what are the NPVs of the two​ projects?

c. Why do IRR and NPV rank the two projects​ differently?

c. Why do IRR and NPV rank the two projects​ differently? ​ (Select from the​ drop-down menus.)

NPV and IRR rank the two projects differently because they are measuring different things.

▼

NPVNPV

IRRIRR

is measuring value​ creation, while

▼

NPVNPV

IRRIRR

is measuring return on investment. Because returns do not scale with different levels of​ investment, the two meas

Answer 1

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