Based on the chart below, answer the following questions:
- The intern thinks Project A should be accepted because it has a higher IRR. What are your thoughts on that logic?
- What is the significance of the intersection of the NPV profiles?
- What is the significance of the intersection of the NPV profiles, the slope of the profiles, and the intersection of the profiles on the x axis of the graph?
1 cost of capital 0.0924 1 2. 3 5 6 A Cumulative DCF Cumuative DCF -10000 -10000 -10000 -10000 4500 -5500 4119 -5881 4500 -1000 3771 -2110 4500 3500 3452 1342 4500 8000 3160 4502 4500 12500 2893 7395 4500 17000 2648 10043 NPV 10043 IRR 0.3867 MIRR 0.2266 PB DPB 2.2222 2.6112 2.00 PI 8000 -14000 B Cumulative DCF Cumuative DCF - 30000 -30000 -30000 -30000 8000 -22000 7323 -22677 4000 -10000 3068 -12904 6704 2000 16000 -8000 8000 1404' 10285 -11500 -1215 22000 30000 12946 11731 Project 0.0000 17,000 0.0100 16,080 0.0200 15,206 0.0300 14,377 0.0400 13,590 0.0500 12,841 0.0600 12,128 0.0700 11,449 0.0800 10,803 0.0900 10,187 0.1000 9,599 0.1100 9,037 0.1200 8,501 0.1300 7,989 0.1400 7,499 0.1500 7,030 0.1600 6,581 0.1700 6,151 0.1800 5,739 0.1900 5,344 0.2000 4,965 0.2100 4,601 0.2200 4,251 0.2300 3,915 0.2400 3,592 0.2500 3,281 0.2600 2,982 0.2700 2,695 0.2800 2,417 0.2900 2,150 0.3000 1,892 0.3100 1,644 0.3200 1,404 0.3300 1,173 0.3400 949 0.3500 733 Project 30,000 27,516 25,177 22,972 20,892 18,929 17,075 15,322 13,665 12,095 10,609 9,200 7,863 6,595 5,390 4,245 3,157 2,121 1,134 195 (701) (1,555) (2,370) (3,148) (3,892) (4,603) (5,283) (5,933) (6,556) (7,153) (7,724) (8,273) (8,799) (9,304) (9,788) (10,254) -15973 NPV IRR MIRR PB 11731 0.1921 0.1542 4.5000 5.0938 1.39 DPB PI 1 cost of capital 0.0924 1 2. 3 5 6 A Cumulative DCF Cumuative DCF -10000 -10000 -10000 -10000 4500 -5500 4119 -5881 4500 -1000 3771 -2110 4500 3500 3452 1342 4500 8000 3160 4502 4500 12500 2893 7395 4500 17000 2648 10043 NPV 10043 IRR 0.3867 MIRR 0.2266 PB DPB 2.2222 2.6112 2.00 PI 8000 -14000 B Cumulative DCF Cumuative DCF - 30000 -30000 -30000 -30000 8000 -22000 7323 -22677 4000 -10000 3068 -12904 6704 2000 16000 -8000 8000 1404' 10285 -11500 -1215 22000 30000 12946 11731 Project 0.0000 17,000 0.0100 16,080 0.0200 15,206 0.0300 14,377 0.0400 13,590 0.0500 12,841 0.0600 12,128 0.0700 11,449 0.0800 10,803 0.0900 10,187 0.1000 9,599 0.1100 9,037 0.1200 8,501 0.1300 7,989 0.1400 7,499 0.1500 7,030 0.1600 6,581 0.1700 6,151 0.1800 5,739 0.1900 5,344 0.2000 4,965 0.2100 4,601 0.2200 4,251 0.2300 3,915 0.2400 3,592 0.2500 3,281 0.2600 2,982 0.2700 2,695 0.2800 2,417 0.2900 2,150 0.3000 1,892 0.3100 1,644 0.3200 1,404 0.3300 1,173 0.3400 949 0.3500 733 Project 30,000 27,516 25,177 22,972 20,892 18,929 17,075 15,322 13,665 12,095 10,609 9,200 7,863 6,595 5,390 4,245 3,157 2,121 1,134 195 (701) (1,555) (2,370) (3,148) (3,892) (4,603) (5,283) (5,933) (6,556) (7,153) (7,724) (8,273) (8,799) (9,304) (9,788) (10,254) -15973 NPV IRR MIRR PB 11731 0.1921 0.1542 4.5000 5.0938 1.39 DPB PI
