(Q1) Capitol Healthplans, Inc., is evaluating two differentmethods for providing home health services to its members. Bothmethods involve contracting out for services, and the healthoutcomes and revenues are not affected by the method chosen.Therefore, the incremental cash flows for the decision are alloutflows. Here are the projected flows: Year Method A Method B 0($300,000) ($120,000) 1 66,000 96,000 2 66,000 96,000 3 66,00096,000 4 66,000 96,000 5 66,000 96,000 (a) What is eachalternatives IRR? (b) If the cost of capital for both methods is 9percent, which method should be chosen? Why?
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