Decision regarding selection of best projects using npv and

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Decision regarding selection of best projects using NPV and IRR.

Henn Corp, Ltd. is examining two investment projects as a part of its expansion plan for the coming year. These two projects are not mutually exclusive. The cost of Project A is $12,950 while the second project (B) is expected to cost $18,625. Henn's cost of capital (required rate of return) is 11.5%. Expected annual cash flows are projected to be as follows:

Year 

Project A

Project B

 1

  3,250.00

  6,850.00

 2

  3,250.00

  6,850.00

 3

  3,250.00

  6,850.00

 4

  3,250.00

  6,850.00

 5

  3,250.00

  6,850.00

Each project will last an estimated 5 years with no remaining significant scrap value. Determine the IRR and the NPV for each of these two projects. What should Henn Corp decide about each proposed project.

Reference no: EM13356067

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