Calculate the two projects internal rate of return

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Question - On May 11, 2021, the total market value of company "Bella Limited" is $40 million dollars. In the beginning of the year, the company issued a ten-year bond with a coupon rate 12% that is currently trading at 1,125 dollars. The market ongoing rate of interest/discount rate was 8%. The CEO of the company is considering undertaking two solar projectsnamely, project "Lambda" that has a cost of $15,000 and is expected to produce benefits (e.g., cash flows) of $5,000per year for five years and project "EPSILON" that costs $24,000 and is expected to produce cash flows of $6,500 per year for five years.

a. Calculate the two projects Internal Rate of Return and Profitability Indices.

b. Which project would be selected, assuming that are Mutually Exclusive, using each ranking method?

c. Discuss in detail the advantages and disadvantages of the IRR criterion.

d. Which ranking criterion is better IRR or NPV? Carefully explain your answer.

Reference no: EM132968593

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