Question: You are choosing between two projects but can only take one. The cash flows for the projects are given in the following table: 0 1

You are choosing between two projects but can only take one. The cash flows for the projects are given in the following table: 0 1 2 3 4 A -$50 $25 $20 $20 $15 B -$100 $20 $40 $50 $60

a. What are the IRRs of the two projects? as you cannot calculate you will be provided with the IRRs Project A IRR = 24% Project B IRR = 21%

b. If your discount rate is 5%, what are the NPVs of the two projects?

c. Why do IRR and NPV rank the two projects differently?

Plan: We can compute the IRR by using an approach similar to Eq. 8.3 and then rearranging it so that NPV equals zero and solving for r. Once we compute r, we can compute the NPV of both projects. 0 1 2 3 4 50 25 20 20 15 100 20 40 50 60

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

25. Excel Project and Excel Solution You are choosing between two projects but can only take one. The cash flows for the projects are given in the following table: 0 1 2 3 4 A -$50 25 20 20 20 15 B...

Claire is choosing between two projects but can only take one. The cash flows for the projects are given in the following table ($ million): Project Year 0 Year 1 $24 A -$54.7 -$90.3 Year 2 $20 $39...

Please answer it with the Excel formula. Complete the steps below using cell references to given data or previous calculations. In some cases, a simple cell reference is all you need. To copy/paste a...

FIN222 Week 7_T CH8: RQ5 P5,9,10(a),20,23,24,26,27 (9 Questions, 15 parts) RQ5. Under what conditions will the IRR rule and the NPV rule give the same accept/reject decision? P5. You have been...

24. You are choosing between two projects, but can only take one. The cash flows for the projects are given in the following table: 4 0 $50 -$100 A B 1 25 20 2 20 40 3 20 50 15 60 24. You are...

Complete the steps below using cell references to given data or previous calculations. In some cases, a simple cell reference is all you need. To copy/paste a formula across a row or down a column,...

home / study / business / finance / finance questions and answers / you are choosing between two projects, but can only take one. the cash flows for the project ... Question: You are choosing between...

Please answer the following (these should have multiple parts in the answer). i will rate your answer! Orchid Biotech Company is evaluating several different development projects for experimental...

Can you make sure to put the steps we have to take in excel please. Complete the steps below using cell references to given data or previous calculations. In some cases, a simple cell reference is...

stationary in a frictionless piston-cylinder arrangement with 10 kg of water at 10 MPa at a temperature of OC. Heat is given until the temperature is 400 oC at pressure and then heat is withdrawn...

Let X1, X2,..., Xn be iid from a distribution with mean Î¼ and variance Ï2, and let S2 be the usual unbiased estimator of Ï2. In Example 7.3.4 we saw that, under normality, the...

Which of the following statements is true of small - claims courts? They only handle cases where the amount in controveryy is less than $ 2 , 0 0 0 . Thew have eeneral hurisciction. They only handle...

Skills necessary for success in marketing include Multiple select question. analytical thinking advertising industry experience infallibility ability to work with others

Explain the development of human resource management (HRM)

Based on what you know about Carter Cleaning Centres, outline the steps of what you think would be an ideal grievance process for this company. On visiting one of the cleaning locations, Jennifer was...

In addition to the grievance process, can you think of anything else that Carter Cleaning Centres might do to ensure that grievances can be expressed and shared with top management without fear of...