Consider the following two mutually exclusive projects:
Year
Cash Flow (Project I)
Cash Flow (Project II)
0
-$12,300
-$44,000
1
$1,800
$14,000
2
$6,000
$30,000
3
$2,000
$5,000
4
$5,000
$10,000
5
$7,000
$5,000
The required return is 10% for both projects. Assume that the
internal rate of return (IRR) of Project I and Project II is 18%
and 15%, respectively.
a) Which project will you choose if you apply the NPV criterion?
Why?
b) Which project will you choose...