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Butler Co. is considering two mutually exclusive projects (Project A and Project B) with the following projected cash flows: Year 0 1 2 3 4 Project A cash flows -$10,000 $2,500 $3,500 $4,500 $5,000 Project B cash flows −$50,000 $10,000 $16,000 $19,000 $21,000 The WACC for both projects is 8%. Butler performed an analysis of these projects using both the NPV method and the IRR method, with the following results: NPV (Project A) = $2,563 IRR (Project A) = 17.77% NPV (Project B) = $3,495 IRR (Project B) = 10.77% What decision should be made regarding these projects, and why?

Financial Management, Finance

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