Question: First and second dropdown: required rate of return internnal rate of return modified internal rate of return 3 dropdown: NVP IRR 7. Understanding the NPV

First and second dropdown: required rate of return internnal rate of return modified internal rate of return 3 dropdown: NVP IRR 7. Understanding First and second dropdown:

required rate of return

internnal rate of return

modified internal rate of return

3 dropdown:

NVP

IRR

7. Understanding the NPV profile If projects are mutually exclusive, only one project can be chosen. The internal rate of return (IRR) and the net present value (NPV) methods will not always choose the same proiect. If the crossover rate on the NPV profile is below the horizontal axis, the methods will always agree. Projects Y and Z are mutually exclusive projects. Their cash flows and NPV profiles are shown as tollows. Year Project Y Project Z 1,500 1,500 200 $400 $600 4 S1,000 S90) 600 300 S2k) Project Y Project Z 11 200 0 26 0 12 14 16 18 20 COST OF CAPITAL (Percent)

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