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Question 2 (30 Marks) In this question, Project A and Project B are mutually exclusive. For both projects, the cost of capital is 10 percent.

Question 2 (30 Marks)

In this question, Project A and Project B are mutually exclusive. For both projects, the

cost of capital is 10 percent. Based on their cash flows as shown in the table below,

answer the questions that follow.

Year

 0

 1

 2

 3

 4

Project A -100

 50

 50

 50

 50

Project B -400

 170

 170

 170

 170

1. Calculate the NPV of Project A. (5 Marks)

2. Calculate the NPV of Project B (5 Marks)

3. Calculate the IRR of Project A (7 Marks)

4. Calculate the IRR of Project B (7 Marks)

5. Which of the two projects would you advise a company to invest in? Why? (6

Marks)

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