1. The Lon Ki Manufacturing Company must decide between two investments, A and B, which are mutually exclusive. The data on these projects are as follows (in thousands of dollars):
Year
|
Project |
0 |
1 |
2 |
3 |
4 |
|
A |
$(100) |
$120.00 |
|||
|
B |
(100) |
$193.80 |
1. For each project, compute:
(a) NPV at 12 percent cost of capital
(b) IRR
2. Why the conflicting ranking? Make a recommendation on which project should be
chosen.