Q1) Henn Corp, Ltd. is studying two investment projects as a part of its expansion plan for coming year. These two projects are not mutually exclusive. Cost of Project A is $12,950 where as second project (B) is expected to cost $18,625. Henn's cost of capital (required rate of return) is 11.5%. Expected annual cash flows are projected to be as follows:
| Year |
Project A |
Project B |
| 1 |
3,250.00 |
6,850.00 |
| 2 |
3,250.00 |
6,850.00 |
| 3 |
3,250.00 |
6,850.00 |
| 4 |
3,250.00 |
6,850.00 |
| 5 |
3,250.00 |
6,850.00 |
Each project will last estimated 5 years with no remaining significant scrap value. Find out IRR and NPV for each of these two projects. What must Henn Corp decide about each proposed project.