In: Finance
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 |
−$48 |
$23 |
$18 |
$21 |
$12 |
B |
−$100 |
$21 |
$41 |
$50 |
$59 |
a. What are the IRRs of the two projects?
b. If your discount rate is 4.5%, what are the NPVs of the two projects?
c. Why do IRR and NPV rank the two projects differently?