W company is considering the following mutually exclusive projects: Project A Project B Year Cash...
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W company is considering the following mutually exclusive projects: Project A Project B Year Cash Flow Cash Flow 0 -$5,000 -$5,000 1 200 3,000 2 800 3,000 3 3,000 800 4 5,000 200 At what cost of capital will the net present value of the two projects be the same? (That is, what is the crossover rate?) Calculate each projects IRR. Based on IRR, which project is better? Calculate the NPV for both projects using WACC = 10%, and again for WACC = 20%. For each WACC, which one would you choose, A or B? Is each choice consistent with a decision based on IRR? Explain any discrepancy by including the significance of your answer in parts a. .
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