Tesar Chemicals is considering Projects S and L, whose cash
flows are shown below. These projects are mutually exclusive,
equally risky, and not repeatable. The CEO believes the IRR is the
best selection criterion, while the CFO advocates the NPV. If the
decision is made by choosing the project with the higher IRR rather
than the one with the higher NPV, how much, if any, value will be
forgone, i.e., what's the chosen NPV versus the maximum possible
NPV? Note that (1) "true value" is measured by NPV, and (2) under
some conditions the choice of IRR vs. NPV will have no effect on
the value gained or lost.
WACC: 
8.75% 

0 
1 
2 
3 
4 

CF_{S} 
$1,100 
$550 
$600 
$100 
$100 
CF_{L} 
$2,700 
$650 
$725 
$800 
$1,400 
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