Acompany is analyzing two mutually exclusive projects, s and l, with the following cash flows: 0 1 2 3 4project s -$1,000 $895.03 $250 $10 $5project l -$1,000 $5 $260 $420 $802.50the company's wacc is 10.5%. what is the irr of the better project? (hint: the better project may or may not be the one with the higher irr.) round your answer to two decimal places.

Project L is the better project as it has higher NPV and its IRR is 12.70%

Explanation:

- NPV of Project S as followed:

-1,000 + 895.03/(1+10.5%) + 250/(1+10.5%)^2 + 10/(1+10.5%)^3 + 5/(1+10.5%)^4 = $25.5

- NPV of Project L as followed:

-1,000 + 5/(1+10.5%) + 260/(1+10.5%)^2 + 420/(1+10.5%)^3 + 802.5/(1+10.5%)^4 = $67.

=> Project L is the better Project as it has higher NPV.

The IRR is the discount rate that puts the net present value of project's cash flows to 0 (zero).

- IRR of Project L as followed:

-1,000 + 5/(1+IRR) + 260/(1+IRR)^2 + 420/(1+IRR)^3 + 802.5/(1+IRR)^4 = 0 <=> IRR = 12.70%