Contract Manufacturing, Inc. is considering two alternative investment proposals. The fi rst proposal calls for a major renovation of the company’s manufacturing facility. The second involves...

Contract Manufacturing, Inc. is considering two alternative investment proposals. The fi rst proposal calls for a major renovation of the company’s manufacturing facility. The second involves replacing just a few obsolete pieces of equipment in the facility. The company will choose one project or the other this year, but it will not do both. The cash fl ows associated with each project appear below, and the fi rm discounts project cash fl ows at 15 percent. Year Renovate Replace 0 –$9,000,000 –$1,000,000 1 3,500,000 600,000 2 3,000,000 500,000 3 3,000,000 400,000 4 2,800,000 300,000 5 2,500,000 200,000 a. Rank these investments based on their NPVs. b. Rank these investments based on their IRRs. c. Why do these rankings yield mixed signals?