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.

WACC: 7.75%

Year01234

CFS −$1,050$675$650

CFL −$1,050$360$360$360 $360

If the decision is made by choosing the project with the higher IRR, how much value will be forgone?

What is the underlying cause of ranking conflicts between NPV and IRR?