Calculate the npv and irr

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Mr. Chandan Chopra, the Chairman of Giant Enterprises, has to make a choice between two possible investments:

Cash Flows C0 C1 C2

Project A -400 +250 +300

Project B -200 +140 +179

The opportunity cost of capital for Giant Enterprises is 9%. Mr. Chopra is inclined to take the project with the higher IRR and the shorter PBP.

A. Find the PBP of each project, and comment on the advantages and disadvantages of using it to choose projects.

B. Calculate the NPV and IRR of each project and explain to Mr. Chopra the advantages of using NPV over IRR.

C. Also enlighten Mr. Chopra on Profitability Index.

Reference no: EM133233566

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