If the decision is made by choosing the project with the higher IRR, how much value will be forgone?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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  1. Carolina Company is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and are not repeatable.

WACC:  7.75%                                            

Year           0                1           2          3         4

CFS        −$1,050     $675     $650               

CFL        −$1,050     $360     $360    $360  $360

 

 

If the decision is made by choosing the project with the higher IRR, how much value will be forgone? 

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