Trident Corp. is evaluating two independent projects. The costs and expected cas

Question

Trident Corp. is evaluating two independent projects. The costs and expected cash flows are given in the following table. The cost of capital is 9.88 percent.

a. Calculate the projects%u2019 NPV. (Round answers to 2 decimal places, e.g. 15.25.)

b. Calculate the projects%u2019 IRR. (Round answers to 2 decimal places, e.g. 15.25.)

c. Which project should be chosen based on NPV? Based on IRR? Is there a conflict?

d. If you are the decision maker for the firm, which project or projects will be accepted?

Year
A
B
0 ($310,755) ($405,169) 1 120,539 143,494 2 120,539 153,950 3 120,539 169,827 4 120,539 138,059 5 120,539 128,564

Explanation / Answer

a)

Project A - NPV = 147,586.95

Project B - NPV = 155,917.85

b)

Project A - IRR = 27.09%

Project B - IRR = 24.24%

c) Trident should choose project B

There is conflict between the NPV and IRR decisions

d)

Both Projects will be accepted

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