Project A

NPV Project A

$=-$$$48,000+\frac{\text{\$}15,000}{(1+\mathrm{.}10)}+\frac{\text{\$}15,000}{(1+\mathrm{.}10{)}^2}+\frac{\text{\$}15,000}{(1+\mathrm{.}10{)}^3}+\frac{\text{\$}15,000}{(1+\mathrm{.}10{)}^4}+\frac{\text{\$}15,000}{(1+\mathrm{.}10{)}^5}$

$=$$$8,861\mathrm{.}80$

NPV Project A

$=-$$$48,000+$$$13,636\mathrm{.}36+$$$12,396\mathrm{.}69+$$$11,269\mathrm{.}72+$$$10,245\mathrm{.}20+$$$9,313\mathrm{.}82$

$=$$$8,861\mathrm{.}80$

Also written as:

NPV Project A

$=$$$13,636\mathrm{.}36+$$$12,396\mathrm{.}69+$$$11,269\mathrm{.}72+$$$10,245\mathrm{.}20+$$$9,313\mathrm{.}82-$$$48,000$

$=$$$8,861\mathrm{.}80$

Project B

NPV Project B

$=-($$$52,000)+\frac{\text{\$}18,000}{(1+\mathrm{.}10)}+\frac{\text{\$}20,000}{(1+\mathrm{.}10{)}^2}+\frac{\text{\$}15,000}{(1+\mathrm{.}10{)}^3}+\frac{\text{\$}12,000}{(1+\mathrm{.}10{)}^4}+\frac{\text{\$}10,000}{(1+\mathrm{.}10{)}^5}$

$=$$$6,567\mathrm{.}66$

NPV Project B

$=-($$$52,000)+$$$16,363\mathrm{.}64+$$$16,528\mathrm{.}93+$$$11,269\mathrm{.}72+$$$8,196\mathrm{.}16+$$$6,209\mathrm{.}21$

$=$$$6,567\mathrm{.}66$

Calculate the IRR for the projects listed in NPV exercises.

Which has the highest IRR?

If our hurdle rate is $10\%,$ which should we accept?