Question: Use the data from the second scenario to answer this question. What is the IRR for project A? A. 13.56% B. 14.89% C. 14.18% D.
Use the data from the second scenario to answer this question.
What is the IRR for project A?
| A. | 13.56% | |
| B. | 14.89% | |
| C. | 14.18% | |
| D. | 15.23% |
Use the following information to answer question
Below are the estimated cash flows for two mutually exclusive projects for a company. The company has a WACC of 12%.
Cash flows in M $
year / project a / project b
0 /$(45,000.00) /$(12,000.00)
1 /$ 2,000.00 / $2,000.00
2 / $ 5,000.00 / $2,000.00
3/ $12,000.00 / $3,000.00
4 /$27,000.00 / $ 5,000.00
5 / $30,000 / $8,000.00
Use the data from the second scenario to answer this question.
What is the NPV of project A?
| A. | $3,120.39 | |
| B. | $3,494.84 | |
| C. | $3,566.78 | |
| D. | $5,239.71 |
Expert Answer
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Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)
=2000/1.12+5000/1.12^2+12000/1.12^3+27000/1.12^4+30,000/1.12^5
=48494.84
NPV=Present value of inflows-Present value of outflows
=48494.84-45000
=$3494.84(Approx).
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