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The following net cash flows relate to two projects:
NET CASH FLOWS (IN $1,000)
YEAR
0
1
2
3
4
5
6
PROJECT A
–60
20
PROJECT B
–72
45
22
13
Calculate the NPVs for each project, assuming 10% cost of capital.
Assuming that the two projects are independent, would you accept them if the cost of capital is 15%?
What is the IRR of each project?
Which of the two projects would you prefer if they are mutually exclusive, given a 15% discount rate?
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