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Kudos Entertainment Inc. has enough capital to choose only one of the two proposed short term...

Kudos Entertainment Inc. has enough capital to choose only one of the two proposed short term projects: SunFun and MoonJoy. The cash flows for each project are shown below. The CFO of this company graduated from a program in which it was taught that the project with higher IRR is always the preferred one. If the company makes investment based on this decision rule, how much value will be forgone?

WACC: 5%

Year                                             0                    1   2   3 4   

CFSunFun      -$2,000            $20    $20               $20 $3150

CFMoonJoy    -$2,500            $30    $30               $30 $3800

A.

$51.67
B.

$61.99
C.

$55.36
D.

$54.29
E.

$66.79

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jeff jeffy answered 1 year ago
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