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Fiat, a big European firm, is deciding among two mutually exclusive investments in Italy. The two...

Fiat, a big European firm, is deciding among two mutually exclusive investments in Italy. The two projects have the following cash flows:

Project A                            Project B

Year                     Cash Flow                          Cash Flow

0                         -€50,000                            -€30,000

1                            15,000                              8,000

2                            20,000                              12,000

3                            40,000                            18,000

4                            25,000                              12,000

The company’s weighted average cost of capital is 10 percent (WACC = 10%). What is the net present value (NPV) of the project with the highest internal rate of return (IRR)?

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