Company B is deciding which between the 2 projects should it invest in (supported by the cash flow patterns shown below). The company's cost of capital is approximately 9% but due to the current economic environment, its cost of equity may increase and may be a bit more than the approximated value. YearProject 1Project 20 (initial outlay)-13 million-12 million13 million8 million23 million6 million35 million1 million45 million1 million55 million1 million 1. calculate the NPV and IRR of both projects2. which project should the company invest in? would you choose to follow the npv or irr route? explain your answer

The question is based on the concept of capital budgeting and its techniques. The Net present value…

Answered: Company B is deciding which between the…

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter26: Capital Investment Analysis

Section: Chapter Questions

Problem 3CMA

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Company B is deciding which between the 2 projects should it invest in (supported by the cash flow patterns shown below). The company's cost of capital is approximately 9% but due to the current economic environment, its cost of equity may increase and may be a bit more than the approximated value.

Year	Project 1	Project 2
0 (initial outlay)	-13 million	-12 million
1	3 million	8 million
2	3 million	6 million
3	5 million	1 million
4	5 million	1 million
5	5 million	1 million

1. calculate the NPV and IRR of both projects

2. which project should the company invest in? would you choose to follow the npv or irr route? explain your answer

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