onsider the following two mutually exclusive projects:
Cash Flow
Year
Project A
Project B
0
$
2,000,000 $
2,000,000
1
$
150,000 $
670,000
2
$
300,000 $
600,000
3
$
600,000 $
500,000
4
$
1,000,000 $
500,000
5
$
500,000 $
300,000
6
$
500,000 $
150,000
quire a 10% return on your investment.
If you apply the payback criterion, which investment will you choose?
If you apply the NPV criterion, which investment will you choose? Wb
If you apply the IRR criterion, which investment will you choose? W
Which project will you finally choose? Why?