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Two mutually exclusive alternatives, projects C and D, have the following investments and cash flows: a. Calculate

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Two mutually exclusive alternatives, projects C and D, have the following investments and cash flows:
Two mutually exclusive alternatives, projects C and D, have the

a. Calculate the NPV and IRR of each project. The company's cost of capital is 12 percent.
b. Which of the two projects would you accept? Explain.
c. Sketch the two projects' NPV profiles

Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...
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Project C Project D $40,000 20,500 20,500 20,500 nvestment at period S40,000 Cash inflow at t1 Cash inflow at t= 2 Cash inflow at 1 = 3 10,000 10,000 47,000

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a Calculation of net present values Project C Cash Flows PV of Cash Flows Year 0 40000 40000 Year 1 ...View the full answer


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The internal rate of return, or IRR, is a metric used to measure the profitability of an investment. It is the discount rate that makes the net present value of an investment equal to zero. To calculate the IRR, we need to know the investment\'s cash flows. These are the inflows and outflows of cash that will result from the investment. For example, an investment in a property might have cash outflows for the purchase price, closing costs, and any renovations, and cash inflows from rent and eventual sale of the property. The IRR is the discount rate at which the NPV of the investment is equal to zero. There are many ways to calculate IRR, from simple spreadsheet functions to more complex financial modeling software. It\'s worth noting that IRR can be a bit tricky when it comes to projects that don\'t have a consistent cash flow over time. These types of investments are known as \"irregular cash flow\" and the IRR might be misleading or not suitable to calculate. There are other metrics to evaluate these investments such as Modified Internal Rate of Return (MIRR) which is a variation of IRR and is used to get more accurate results.

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