Problem: A firm with a 14% 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
Project A -$6,000 $2,000 $2,000 $2,000 $2,000 $2,000
Project B -$18,000 $5,600 $5,600 $5,600 $5,600 $5,600
Q1. Calculate NPV, IRR, MIRR, payback, and discounted payback for each project.
Q2. Assuming the projects are independent, which one or ones would you recommend?
Q3. If the projects are mutually exclusive, which would you recommend?
Q4. Notice that the projects have the same cash flow timing pattern. Why is there a conflict between NPV and IRR?