Question

2. A company is analyzing two mutually exclusive projects, S and L, with the following cash flows: 4 $900 $0 $10 $400 $10 $800 Project S $1,000 Project L $1,000 The companys WACC is 1 1%. What is the IRR of the better project? (Hint: The better project may or may not be the one with the higher IRR.) $250 $250
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Answer #1
Project S Project L
0 -1000 -1000
1 900 0
2 250 250
3 10 400
4 10 800
IRR using Excel IRR funiton 13.49% 11.74%

Project S is Better because of Higher IRR of 13.49% and also its more than WACC 11%

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