Two mutually exclusive alternatives, projects C and D, have the following investments and cash flows:
Project c Project d
Investment period t=0 40,000 40,000
Cash inflows at t = 1 10,000 20,500
Cash inflows at t = 2 10,000 20,500
Cash inflows at t=3 47,000 20,500
a. Calculate the NPV and the IRR of each project. The company's cost of capital is 12 percent.
b. Which of the two projects would you accept? Explain.
c. Sketch the two projects NPV profiles.