A company is analyzing two mutually exclusive projects, S and L, with the following cash flows:...

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A company is analyzing two mutually exclusive projects, S and L, with the following cash flows: 1 3 Project S Project L The c

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Answer 1

Answer #1

After analysing the Cash Flows of Project S and Project L through NPV (Net Present Value) and IRR methods. Both the projects are NPV positive and IRR is more than WACC of 8.5%.

Project L is to be selected. Further Project L has cash inflows in ascending order hence it should be selected

	Project S	Project L
0	-1000	-1000
1	885.82	0
2	250	250
3	15	400
4	5	847.76
NPV	155.82	497.76
IRR	12%	13%

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Answer 2

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