Question
A company has $20 million available to invest in new projects.There are three independent projects that it is considering.The after-tax cash flows of the projects
A company has $20 million available to invest in new projects.There are three independent projects that it is considering.The after-tax cash flows of the projects are as follows:
ProjectInvestment (today)Year 1 cash flowYear 2 cash flow
A20 million20 million10 million
B10 million8 million7 million
C10 million6 million10 million
Calculate the IRR, PI and NPV of each of the two-year projects and recommend which project(s) the company should invest in (and why).The company's cost of capital is 15%
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An Introduction to Investment Banks, Hedge Funds, and Private Equity
Authors: David P. Stowell
1st edition
978-0123745033, 0123745039, 978-9380931074
