Consider the following data for Projects A and B.
Project A Project B
PV factor 5% PV factor of 8%
Cash flows Year Cash flows Year
-500 0 -1000 0
86 1 220 1
150 2 300 2
200 3 300 3
200 4 300 4
• Compute IRR, NPV, and payback for both projects. Show all calculations.
• Based on your analysis, would you recommend the management to go ahead with Project A? Why or why not?
• Based on your analysis, would you recommend the management to go ahead with Project B? Why or why not?
• If the company can take up only one project due to limited resources, which project would you recommend that the company choose? Why?
Show all calculations and describe your rationale for each decision.