Murray Inc. is considering Projects S and L, whose cash flows are shown below. T
ID: 2644660 • Letter: M
Question
Murray Inc. is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and not repeatable. The CEO wants to use the IRR criterion, while the CFO favors the NPV method. You were hired to advise Murray on the best procedure. What are the projects IRRs, NPVs and what is the crossover rate? Which project should be accepted?
WACC:
6.00%
Year
0
1
2
3
4
CFS
-$1,025
$380
$380
$380
$380
CFL
-$2,150
$765
$765
$765
$765
WACC:
6.00%
Year
0
1
2
3
4
CFS
-$1,025
$380
$380
$380
$380
CFL
-$2,150
$765
$765
$765
$765
Explanation / Answer
Ans:
C.
$28.02
C.
$28.02
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