Problem
Thomas Company is considering two mutually exclusive projects. The? firm, which has a cost of capital of 8?%, has estimated its cash flows as shown in the following? table:
Initial investment (CF0?) Project A Project B
$150,000 $79,000
Year (t) Cash inflows (CFt?)
1 $35,000 $40,000
2 $30,000 $30,000
3 $50,000 $25,000
4 $55,000 $25,000
5 $70,000 $5,000
a. Calculate the NPV of each project, and assess its acceptability.
b. Calculate the IRR for each project, and assess its acceptability.