Question
Acme Fruits is considering two equally risky, mutually exclusive projects, Projects A and B, that have the following cash flows: Year Project A Project B
Acme Fruits is considering two equally risky, mutually exclusive projects, Projects A and B, that have the following cash flows:
| Year | Project A | Project B |
| 0 | -$100,000 | -$97,000 |
| 1 | 60,000 | 30,000 |
| 2 | 25,000 | 15,000 |
| 3 | 60,000 | 80,000 |
| 4 | 40,000 | 65,000 |
a. What is the cost of capital that would make the two projects have the same NPV values?
b. Discuss why this cost of capital that would make two projects have the same NPV value would influence your decision to take project A or project B based on NPV versus IRR method?
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The Private Equity Toolkit A Step By Step Guide To Getting Deals Done From Sourcing To Exit
Authors: Tamara Sakovska
1st Edition
1119697107, 978-1119697107
