A firm with a 14 percent WACC is evaluating two projects for this year's capital budget. After-tax cash flows, including depreciation, are as follows:
0 1 2 3 4 5
Proj A -$6,000 $2,000 $2,000 $2,000 $2,000 $2,000
Proj B -$18,000 $5,600 $5,600 $5,600 $5,600 $5,600
a. Calculate NPV, IRR, MIRR, payback and discounted payback for each project.
b. Assuming the projects are independent, which one or ones would you recommend?
c. If the projects are mutually exclusive, which would you recommend?
d. Notice that the projects have the same cash flow timing pattern. Why is there a conflict wetween NPV and IRR?