Mandate to select between two mutually exclusive projects

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As the CEO of a large corporation, you have been given the mandate to select between two mutually exclusive projects which both cost $1.5 Million. Project 1 is a short term project and has most of its cash flows in the early years while project 2 is long-term and realizes its cash flows in the distant future. The NPV and IRR of the projects are as follows: Project 1 Project 2 NPV $85,500 $55,000 IRR 13.5% 18% The cost of capital is 14%. Considering the timing of the cash flows and the similar size of the project, what recommendation would you make to your board of directors as it relates to the two projects? State all your assumptions.

Reference no: EM131894272

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