The Lon-Ki Manufacturing Company must decide between two investments, A and B, which are mutually exclusive. The data on these projects are as follows (in thousands of dollars):
Year
|
Project
|
0
|
1
|
2
|
3
|
4
|
|
A
|
$(100)
|
$120.00
|
-
|
-
|
-
|
|
B
|
(100)
|
-
|
-
|
-
|
$193.80
|
1. For each project, compute:
(a) NPV at 12 percent cost of capital
(b) IRR
2. Why the conflicting ranking? Make a recommendation on which project should be chosen.