Compute the IRR of Projects A and B, and propose whether to accept or reject each project, assuming there are unlimited funds. Explain your decision.

Answer the following questions using Python.
Trunk Company plans to invest in Project A with the following estimated annual cash flows:
Yr 1 $ 20,000
Yr 2 $ 90,000
Yr 3 $ 180,000
Yr 4 $ 220,000
Yr 5 $ 150,000
The project costs $500,000. The required return for this project is 5% compounded quarterly.
Trunk Company looks at another Project B which might potentially be better than Project A.
Project B has the following cash flows:
Yr 1 $ 150,000
Yr 2 $ 220,000
Yr 3 $ 180,000
Yr 4 $ 90,000
Yr 5 $ 20,000
This project also costs $500,000. The required return for this project is 5% compounded
quarterly, same as Project A.
(a) Compute the IRR of Projects A and B, and propose whether to accept or reject each project, assuming there are unlimited funds. Explain your decision.
(10 marks)
FIN201 Tutor-Marked Assignment
SINGAPORE UNIVERSITY OF SOCIAL SCIENCES (SUSS) Page 4 of 4
(b) Calculate the NPV of each project. Propose whether to accept or reject each project
based on NPV, and choose one project, assuming the Company has funds only for one
project. Explain your decision.
(10 marks)
(c) Explain why one of the projects is superior although the cash flows are the same
except that they are received in different years. What should the cost of the inferior
project be in order to make you indifferent to either project?
What is the resulting annual discount rate of the inferior project?
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