Problem:
Please help with the following problems.
Year Project A Project B
0 -$200 -$200
1 80 100
2 80 100
3 80 100
4 80
Question 1. IRR/NPV. If the opportunity cost of capital is 11 percent, which of these projects is worth pursuing?
Question 2. Mutually Exclusive Investments. Suppose that you can choose only one of these projects. Which would you choose? The discount rate is still 11%.
Question 3. IRR/NPV. Which project would you choose if the opportunity cost of capital were 16%?
Question 4. IRR. What are the internal rates of return on projects A and B?
Question 5. Payback. What is the payback period of each project.