Kosovski Company is considering Projects S and L, whose cash flows are shown below

Kosovski Company is considering Projects S and L, whose cash flows are shown

below. These projects are mutually exclusive, equally risky, and are not repeatable.

If the decision is made by choosing the project with the higher IRR, how much value

will be forgone? Note that under some conditions choosing projects on the basis of

the IRR will cause $0.00 value to be lost.

WACC 6.25%

Year                 CFs            CFl

0                      -$1,050      -$1,050

1                        $675          $360

2                        $650          $360

3                                           $360

4                                          $360

a) $35.69

b) $26.33

c) $29.26

d) $34.82

e) $31.31