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Thomas Company is considering two mutually exclusive projects. The firm, which has a cost of...

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Accounting

Thomas Company is considering two mutually exclusive projects. The firm, which has a cost of capital of 8%, has estimated its cash flows as shown in the following table:

Initial investment (CF0) Project A Project B

$150,000 $79,000

Year (t) Cash inflows (CFt) 1 $35,000 $40,000 2 $30,000 $30,000 3 $50,000 $25,000 4 $55,000 $25,000 5 $70,000 $5,000

a. Calculate the NPV of each project, and assess its acceptability.

b. Calculate the IRR for each project, and assess its acceptability.

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