Question: Capitol Healthplans Inc is evaluating two different methods for providing home health services to its members. Both methods involve contracting out for services, and the
| Capitol Healthplans Inc is evaluating two different methods for providing home health services to its members. Both methods involve contracting out for services, and the health outcomes and revenues are not affected by the method chosen. Therefore, the incremental cash flows for the decision are all outflows. Here are the projected flows: | |||
| Year | Method A | Method B | |
| 0 | $300,000 | $120,000 | |
| 1 | 66,000 | 96,000 | |
| 2 | 66,000 | 96,000 | |
| 3 | 66,000 | 96,000 | |
| 4 | 66,000 | 96,000 | |
| 5 | 66,000 | 96,000 | |
| a. What is each alternative's IRR? |
What is each alternative IRR (and how do you solve for it)?
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