Question

Chestnut Tree Farms has identified the following two mutually exclusive projects. The company uses a discount...

Chestnut Tree Farms has identified the following two mutually exclusive projects. The company uses a discount rate of 6%.

Year

Cash Flow (A)

Cash Flow (B)

0

-38,000

-38,000

1

10,735

16,530

2

14,060

13,395

3

13,015

12,255

4

7,505

2,090
  1. What is the IRR of each project? Based on the IRR criterion, which project(s) would you choose?
  1. What is the NPV of each project? Based on the NPV method which project(s) would you choose?

  1. What is your final choice of project?
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