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?

Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter12: Capital Budgeting: Decision Criteria
Section: Chapter Questions
Problem 7P: Your division is considering two investment projects, each of which requires an up-front expenditure...
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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
−$51
$25
$19
$19
$17
B
−$98
$19
$40
$51
$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?
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