2. You are considering two independent investable projects (An Independent Project is a project whose cash...

 

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2. You are considering two independent investable projects (An Independent Project is a project whose cash flows are not affected by the accept/reject decision for other projects) that have differing requirements. Project A has a required return of 12 percent compared to Project B's required return of 13.5 percent. Project A costs $100,000 and has cash flows of $40,000 and $80,000 for Years 1 and 2, respectively. Project B has an initial cost of $100,000 and cash flows of $60,000 and $70,000 for Years 1 and 2, respectively. Given this information, please: a) Calculating the NPV and giving your decisions (accept or reject) for each project. b) Given the IRR of Project A and B, does your decision change? IRR 11% 15% Project A Project B 2. You are considering two independent investable projects (An Independent Project is a project whose cash flows are not affected by the accept/reject decision for other projects) that have differing requirements. Project A has a required return of 12 percent compared to Project B's required return of 13.5 percent. Project A costs $100,000 and has cash flows of $40,000 and $80,000 for Years 1 and 2, respectively. Project B has an initial cost of $100,000 and cash flows of $60,000 and $70,000 for Years 1 and 2, respectively. Given this information, please: a) Calculating the NPV and giving your decisions (accept or reject) for each project. b) Given the IRR of Project A and B, does your decision change? IRR 11% 15% Project A Project B

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To analyze the projects we can calculate the Net Present Value NPV for each project using the given ... View the full answer