You've estimated the following cash flows (in $) for two projects: A B C 1 Year Project
Question:
You've estimated the following cash flows (in $) for two projects:
A | B | C | |
1 | Year | Project A | Project B |
2 | 0 | -710 | -2,510 |
3 | 1 | 150 | 500 |
4 | 2 | 210 | 730 |
5 | 3 | 290 | 820 |
6 | 4 | 252 | 1,117 |
The required return is 7% for both projects.
Part 1
What is the IRR for project A?
Part 2
What is the IRR for project B?
Part 3
What is the NPV of project A?
Part 4
What is the NPV of project B?
Part 5
If the projects are mutually exclusive, which project should you choose?
Project A, based on the IRR
Neither
Project B, based on the NPV
Project B, based on the IRR
Project A, based on the NPV
Part 6
If the projects are independent, which project should you choose?
Neither
Project A, based on the NPV
Project B, based on the NPV
Both A and B, based on the NPVs of both projects
Project A, based on the IRR
Project B, based on the IRR
Cornerstones of Cost Management
ISBN: 978-1285751788
3rd edition
Authors: Don R. Hansen, Maryanne M. Mowen