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A firm is considering Projects S and L, whose cash flows are shown below.  These projects are...

A firm is considering Projects S and L, whose cash flows are shown below.  These projects are mutually exclusive, equally risky, and not repeatable.  The CEO wants to use the IRR criterion, while the CFO favors the NPV method.  You were hired to advise the firm on the best procedure.  If the wrong decision criterion is used, how much potential value would the firm lose? WACC:  4.00% Year                            0                1                2                3                4     CFS                         -$1,025         $380           $380           $380           $380 CFL                         -$2,150         $765           $765           $765           $765 Hint: NPV =  PV inflows – Cost IRR: Internal Rate of Return IRR is the discount rate that forces PV inflows = cost.

Group of answer choices $306.08 $340.98 $240.19 $377.26

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Answer #1

Calc:-

If 272.51 is not given in choices, then choose the closest to the answer 240.19

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