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10-10. Project A has a cost of $22,000 and is expected to produce benefits (cash flows)...

10-10. Project A has a cost of $22,000 and is expected to produce benefits (cash flows) of $7,000 per year for 5 years. Project B costs $70,000 and is expected to produce cash flows of $20,000 per year for 5 years. Calculate the two projects' NPVs, IRRs, MIRRs, and PIs, assuming a cost of capital of 10%. Which project would be selected, assuming they are mutually exclusive, using each ranking method? Which should actually be selected?

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Expert Solution

Npv rule: project with highest npv is selected (rank project B)

IRR rule : project with lower irr is selected (rank project B)

MIRR rule : project with lower mirr is selected (rank project B)

jeff jeffy answered 1 year ago
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