time. Calculate value R? Exercise 3. A company is considering investing in the following projects. Both...

 

Transcribed Image Text:

time. Calculate value R? Exercise 3. A company is considering investing in the following projects. Both projects have the same initial investment value $ 45,000. Year A (cash-flow in S) B (cash-flow in S) 0.5 +5,000 2 1 +20,000 15,000 25.000 1.25 +30,000 3.5 *** -5,000 +55,000 The company's cost of capital is j = 10% (a) Which project should implement? (b) Should the company invest in project A according to the Internal Rate of Return (IRR) criterion? (use the size of the interpolation interval equal to 5%) (c) Calculate the modified IRR for project B if the reinvestment rate is i=8%? time. Calculate value R? Exercise 3. A company is considering investing in the following projects. Both projects have the same initial investment value $ 45,000. Year A (cash-flow in S) B (cash-flow in S) 0.5 +5,000 2 1 +20,000 15,000 25.000 1.25 +30,000 3.5 *** -5,000 +55,000 The company's cost of capital is j = 10% (a) Which project should implement? (b) Should the company invest in project A according to the Internal Rate of Return (IRR) criterion? (use the size of the interpolation interval equal to 5%) (c) Calculate the modified IRR for project B if the reinvestment rate is i=8%?

Answer rating: 100% (QA)

To determine which project the company should implement we need to calculate the net present value NPV of each project The NPV takes into account the ... View the full answer