You are considering the following two projects and can take only one. Your cost of capital...
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You are considering the following two projects and can take only one. Your cost of capital is 11.1%. The cash flows for the two projects are as follows ($ million): a. What is the IRR of each project? b. What is the NPV of each project at your cost of capital? c. At what cost of capital are you indifferent between the two projects? d. What should you do? (Click on the following icon in order to copy its contents into a spreadsheet.) Project A Year 0 - $99 Year 1 $23 Year 2 $32 B - $99 $50 $39 Year 3 $39 $32 Year 4 $50 $18 You are considering the following two projects and can take only one. Your cost of capital is 11.1%. The cash flows for the two projects are as follows ($ million): a. What is the IRR of each project? b. What is the NPV of each project at your cost of capital? c. At what cost of capital are you indifferent between the two projects? d. What should you do? (Click on the following icon in order to copy its contents into a spreadsheet.) Project A Year 0 - $99 Year 1 $23 Year 2 $32 B - $99 $50 $39 Year 3 $39 $32 Year 4 $50 $18
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SOLUTION a To calculate the IRR of each project we need to find the discount rate that makes the net ... View the full answer
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