Which of the two projects, 7 or 8, is more attractive? How sensitive is our rank

Question

Which of the two projects, 7 or 8, is more attractive? How sensitive is our ranking to the use of high discount rates? Why do NPV and IRR disagree?

Project Number 1 2 3 4 5 6 7 8 Initial Investment ($2,000) ($2,000) ($2,000) ($2,000) ($2,000) ($2,000) ($2,000) ($2,000) Year   1 $330 $1,666 $160 280 $2,200 $1,200 ($350) 2 330 334 200 280 900 (60) 3 330 165 350 280 300 60 4 330 395 280 90 350 5 330 432 280 70 700 6 330 440 280 1,200 7 330 442 280 2,250 8 1,000 444 280 9 446 280 10 448 280 11 450 280 12 451 280 13 451 280 14 452 280 15 10,000 (2,000) 280 Sum of Cash Flow Benefits $3,310 $2,165 $10,000 $3,561 $4,200 $2,200 $2,560 $4,150 Excess of Cash Flow    Over Initial Investment $1,310 $165 $8,000 $1,561 $2,200 $200 $560 $2,150

Explanation / Answer

Project 7 is more viable and attractive as the returns are available in the next 5 years whereas project 8 has to suffer losses in the first 2 years and also its returns is spread in the future years . though it is earning more than project 7 but the funds of Project 7 will be free before project 8 and can be reinvested again .

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