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 |
negative $ 49−$49 |
$ 26$26 |
$ 20$20 |
$ 20$20 |
$ 13$13 |
B |
negative $ 98−$98 |
$ 22$22 |
$ 41$41 |
$ 51$51 |
$ 61$61 |
a. What are the IRRs of the two projects?
b. If your discount rate is
5.2 %5.2%,
what are the
NPVs
of the two projects?
c. Why do IRR and NPV rank the two projects differently?