Consider the three2-year projects with the following cash flow schemes: t=0t=1t=2 Project1-1000060007200 Project2-10000100002400 Project3-1000020000-8800 Assuming that the
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Question:
Consider the three 2-year projects with the following cash flow schemes:
t = 0 t = 1 t = 2
Project 1 -10000 6000 7200
Project 2 -10000 10000 2400
Project 3 -10000 20000 -8800
Assuming that the opportunity cost of capital is k = 10%, Calculate the internal rate of return (IRR), the economic interpretation of the rate of return on investment (ROI), the geometric average rate of return (GAR), and the net present value (NPV) of the three projects. If the projects are not mutually exclusive, comment on which project(s) should be selected if the objective is to maximize the shareholders’ wealth.
Related Book For
Fundamentals Of Corporate Finance
ISBN: 9780135811603
5th Edition
Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford
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