Question: Question 4 Consider the following two cash-flow sequence: Time (Year) Project A Project B 0 -80 -80 1 96 10 2 1 10 3 5

Question 4 Consider the following two cash-flow sequence: Time (Year) Project

Question 4 Consider the following two cash-flow sequence: Time (Year) Project A Project B 0 -80 -80 1 96 10 2 1 10 3 5 90 (a) Find the Internal Rate of Return (IRR) of project A and Project B. And show that IRR(A) > IRR(B). [10] (b) Show that NPV(A) > NPV(B) if the interest rate is r = 0.06 or 6%. [10] (c) Treating NPV (A) and NPV (B) as functions of the interest rate i, plot their graph (s). Use step size of 0.05 (interest rate side) and step size of 10 (NPV side). [5]

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