Question

Consider the following two projects: Project Year 0 Year 1 Year 2 Year 3 Year 4...

Consider the following two projects:

Project Year 0 Year 1 Year 2 Year 3 Year 4 Discount Rate (%)
Cash Flow Cash Flow Cash Flow Cash Flow Cash Flow
A -90 40 50 60 --- 3.0
B -90 30 30 30 30 3.0

(a) The internal rate of return (IRR) for project A is %. (round to two decimals)

(b) The internal rate of return (IRR) for project B is %. (round to two decimals)

(c) The NPV for project A is . (round to two decimals)

(d) The NPV for project B is . (round to two decimals)

Which of the following statements is correct?

A) You should invest in project B since NPV project B > NPV project A and NPV project B > 0.

B) You should invest in project A since IRR project A > IRR project B.

C) Your should invest i project A since NPV project A < 0.

D) You should invest in project A since NPV project A > NPV project B and NPV project A > 0.

The answer is . Fill in "A", "B", "C" or "D".

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