“Carolina 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. Identify also
the range of discounting rates in which project L will be
selected.”

WACC: 7.75%
Year 0 1 2 3 4
CFS -$1,050 $675 $650
CFL -$1,050 $360 $360 $360 $360