Explain the projects based on the irr

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Reference no: EM133067826

The net cash flows for two projects, A and B, are as follows:

Net Cash Flows

Year

Project A

Project B

0

-$60,000

-$35,000

1

$45,000 

$32,000 

2

-$15,000

$17,000 

3

$60,000 

-$5,000 

(i). Can you make capital budgeting decisions for the above projects based on the IRR (internal rate of return) method? Explain.

(ii). Given a discount rate of 10% p.a., calculate the NPV of the above projects.

(iii). Assuming you have $60,000 to invest, which one ought to be selected? Explain.

(iv). Will your answer in Part be different if you have $100,000 to invest and these two projects are not mutually exclusive? Explain.

Reference no: EM133067826

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