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Questions 4-7 are based on the following example:

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Questions 4-7 are based on the following example;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;4. 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?;5. 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?;6. What is the IRR, for each project? Based on the IRR, which project should be selected?;7. If there is a conflict between your decision using the NPV method and your decision using the IRR method, which method takes precedence? Why?

 

Paper#35275 | Written in 18-Jul-2015

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