NPV versus IRR: Bruin, Inc., has identified the following two mutually exclusive projects
(see cash flows below). A) What is the IRR for each of these projects? Using the IRR
decision rule, which project should the company accept? Is this decision necessarily
correct? B) If the requried return is 11%, what is the NPV for each of these projects?
Which project will the company choose if it applies the NPV decision rule?
year
0
1
2
3
4
cash flow (A) $
(37,500.00) $
17,300.00 $
16,200.00 $
13,800.00 $
7,600.00
cash flow (B) $
(37,500.00) $
5,700.00 $
12,900.00 $
16,300.00 $
27,500.00
