As director of capital budgeting, you are reviewing threepotential investment projects with the following cost and cash flowprojections.
Cash Flow | Project A | Project B | Project C |
Investment Cost | ($400,000) | ($375,000) | ($400,000) |
Year One Cash Flow | $200,000 | $75,000 | $50,000 |
Year Two Cash Flow | $50,000 | $75,000 | $120,000 |
Year Three Cash Flow | $75,000 | $85,000 | $140,000 |
Year Four Cash Flow | $50,000 | $225,000 | $125,000 |
Year Five Cash Flow | $125,000 | $60,000 | $125,000 |
1.Calculate the Internal Rate of Return (IRR) for eachproject.
2.Assuming your capital investment budget of $500,000 will onlyallow selection of one project (thus the projects are now mutuallyexclusive), which project should you fund?
