Question

You are choosing between two projects. The cash flows for the projects are given in the following table​ ($ million):

Project	Year 0	Year 1	Year 2	Year 3	Year 4
A	negative $ 49−$49	$ 23$23	$ 20$20	$ 21$21	$ 13$13
B	negative $ 98−$98	$ 20$20	$ 42$42	$ 50$50	$ 60$60

a. What are the IRRs of the two​ projects?

b. If your discount rate is 4.8 %

what are the NPVs of the two​ projects?

c. Why do IRR and NPV rank the two projects​ differently?

(Select from the​ drop-down menus.)

NPV and IRR rank the two projects differently because they are measuring different things.(    )is measuring value​ creation, while

NPVNPV

IRRIRR

( )is measuring return on investment. Because returns do not scale with different levels of​ investment, the two measures may give different rankings when the initial investments are different.

Answer 1