Your division is considering two investment projects, each of which requires an upfront expenditure of $15 million. You estimate that the investments will produce the following net cash flows:
Year Project A Project B
1 $ 5,000,000 $20,000,000
2 $10,000,000 $10,000,000
3 $20,000,000 $ 6,000,000
a. What are the two projects' net present value, assuming the cost of capital is 5%? 10%? 15%?
b. What are the two projects' IRRs at these same costs of capital?