2. A company is evaluating between two mutually exclusive projects. The estima

2. A company is evaluating between two mutually exclusive projects. The estimated cash flows are indicated below projects. The discount rate related to Project
A 12% and the discount rate related to Project B is 16%.

a. Assuming the company is trying to maximize NPV which project should it undertake?

b. Assume the company is trying to maximize the IRR which project should it undertake?

Year Project A Project B

0 ($100000) ($5000)

1 $0 $1500

2 $0 $1500

3 $0 $1500

4 $0 $1500

5 $0 $1500

6 $250000 $3000

Discount rate: 12% 16%

a) NPV: ________ _______

b) IRR: ________ _______