Problem:
Chrome Corp. estimates its cost of capital at 11 percent. The company is considering two mutually exclusive projects whose after-tax cash flows are as follows:
Project S:
Year Cash Flow
0 -3000
1 500
2 2500
3 1500
4 1500
Project L:
Year Cash Flow
0 -9000
1 1000
2 5000
3 5000
4 5000
What is the payback, Net Present Value, Internal Rate of Return, and Modified Internal Rate of Return of each project?