1. Highflier has two possible mutually exclusive projects to consider. The cash flows are as follows...
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1. Highflier has two possible mutually exclusive projects to consider. The cash flows are as follows (5 Marks): Year 0 1 2 3 4 Project A (£ ¹000) -420 150 150 150 150 Project B (£ '000) -100 75 75 0 0 Highflier's cost of capital is 12 per cent. Assume unlimited funds. These are the only cash flows associated with the projects. a) Calculate the internal rate of return (IRR) for each project b) Calculate the net present value (NPV) for each project c) Compare and explain the results in (a) and (b) and indicate which project the company should undertake and why. 1. Highflier has two possible mutually exclusive projects to consider. The cash flows are as follows (5 Marks): Year 0 1 2 3 4 Project A (£ ¹000) -420 150 150 150 150 Project B (£ '000) -100 75 75 0 0 Highflier's cost of capital is 12 per cent. Assume unlimited funds. These are the only cash flows associated with the projects. a) Calculate the internal rate of return (IRR) for each project b) Calculate the net present value (NPV) for each project c) Compare and explain the results in (a) and (b) and indicate which project the company should undertake and why.
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To solve this problem well calculate the internal rate of return IRR and net present value NPV for each project and compare the results The cost of ca... View the full answer
Related Book For
Financial Management Theory and Practice
ISBN: 978-1305632295
15th edition
Authors: Eugene F. Brigham, Michael C. Ehrhardt
Posted Date:
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