Npv-irr and mutually exclusive investments


The Bitter Almond Company was confronted with the two mutually exclusive investment projects, A and B, which have the following after-tax cash flows:

Cash Flows, per Year ($)

Project

0

1

2

3

4

A

(12,000)

5,000

5,000

5,000

5,000

B

(12,000)




25,000

Based on these cash flows: (a) Calculate each project's NPV and IRR. (Assume that the firm's cost of capital after taxes is 10 percent.) (b) Which of the two projects would be chosen according to the IRR criterion? (c) How can you explain the differences in rankings given by the NPV and IRR methods in this case?

Request for Solution File

Ask an Expert for Answer!!
Finance Basics: Npv-irr and mutually exclusive investments
Reference No:- TGS0557611

Expected delivery within 24 Hours