Better Health Inc. is evaluating two capital investments, each of which requires an up-front (Year 0) expenditure of $1.5 million. The projects are expected to produce the following net cash inflows:
Year Project A Project B
1 $ 500,000 $ 2,000,000
2 1,000,000 1,000,000
3 2,000,000 600,000
a) What is each project IRR?
b) What is each project's NPV if the opportunity cost of capital is 10%?
Also, please calculate the payback period for both projects. Then, explain which project you would choose and why.