Question: The president of Boss Enterprises has to make a choice between two mutually exclusive investment projects. Either machine A and or B may be purchased, with associated cash flows as shown in the table below. Suppose that the discount rate is 10 percent.

A. A new employee does not understand the concept of internal rate of return (IRR). Briefly explain it to him.

B. Rank projects A and B according to the criteria of the payback period, the IRR, and net present value (NPV). Which project is the better investment for shareholders? Why?