Answer:
We have been provided with the two different project as follow
| Project S | Project L |
| (1,000) | (1,000) |
| 876.89 | 5 |
| 250 | 240 |
| 10 | 380 |
| 15 | 825.85 |
It is given that, The company’s WACC is 8.5%.
And we nedd to find the IRR better project, it will be calculated As follow
For Project S
IRR = (1,000) + 876.89 (1+r) +250 (1+r)2 +10 (1+r)3 +15 (1+r)4
Now solving this equation by trial and error method we get
IRR =11.90%
For Project L
IRR = (1,000) + 5 (1+r) +240 (1+r)2 +380 (1+r)3 +825.85 (1+r)4
Now solving this equation by trial and error method we get
IRR =11.70%
| IRR | WACC | Who is Better | |
| Poject S | 11.90% | 8.50% | Better |
| Poject L | 11.70% | 8.50% |
