Company K is considering two mutually exclusive projects. The cash flows of the projects are as follows:
Year Project A Project B
0 -2,000,000 -2,000,000
1 500,000
2 500,000
3 500,000
4 500,000
5 500,000
6 500,000
7 500,000 5,650,000
1- compute the NPV and IRR for the above two projects, assuming a 13% required rate of return.
2- discuss why the ranking conflict
3- what decisions should be made regarding these two projects?