Problem based on npv versus irr


Problem:

NPV versus IRR. Here are the cash flows for two mutually exclusive projects:

Project C0 C1 C2 C3
A -$20,000 +$8,000 +$8,000 +$8,000

B -$20,000 0 0 +$25,000

Q1. At what interest rates would you prefer project A to B? Hint: Try drawing the NPV profile of each project.

Q2. What is the IRR of each project?

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Finance Basics: Problem based on npv versus irr
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