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Dupont Chemicals is considering Projects A and B, whose cash flows are shown below. These...

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Finance

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Dupont Chemicals is considering Projects A and B, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and not repeatable. The CEO believes the IRR is the best selection criterion, while the CFO advocates the NPV. If the decision is made by choosing the project with the higher IRR rather than the one with the higher NPV, how much, if any, value will be forgone, ie, what's the chosen NPV versus the maximum possible NPV? Note that (1) "true value is measured by NPV, and (2) under some conditions the choice of IRR . NPV will have no effect on the value gained or lost 7.50% WACC: Year CA 51.100 5550 5600 S100 CFB -$2,700 S650 5725 $800

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