Conflict between your decision using the npv method

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Reference no: EM131869756

Gardial Fisheries is considering two mutually exclusive investments. The forecasted cash flows for each project is as follows:

Year                                        Project A ($)                                       Project B ($)

0                                              -375                                                     -575

1                                              -300                                                     190

2                                              -200                                                     190

3                                              -100                                                     190

4                                              600                                                      190

5                                              600                                                      190

6                                              926                                                      190

7                                             -200                                                       0

a) If each project has a cost of capital of 12%, what is the NPV for each project? Based on this, which project would you select?

b) If each project has a cost of capital of 17%, what is the NPV for each project? Based on this, which project would you select?

c) What is the IRR, for each project? Based on the IRR, which project should be selected?

d) If there is a conflict between your decision using the NPV method and your decision using the IRR method, which method takes precedence? Why?

Please show all work.

Reference no: EM131869756

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