Consider the following two projects: Project Year 0 Cash Flow Year 1 Cash Flow Year 2 Cash Flow Year 3 Cash Flow Year 4 Cash
Consider the following two projects:
| Project | Year 0 Cash Flow | Year 1 Cash Flow | Year 2 Cash Flow | Year 3 Cash Flow | Year 4 Cash Flow | Discount Rate |
| A | -100 | 40 | 50 | 60 | N/A | .15 |
| B | -73 | 30 | 30 | 30 | 30 | .15 |
a) Assume that projects A and B are mutually exclusive. What is the correct investment decision and why? Show your calculations
b) Calculate the incremental cashflows between Projects A and B. Show all calculations.
c) What is the incremental IRR? Which project do you choose based on your answer? Show all calculations
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Authors: Stéphane Goutte, Duc Khuong Nguyen
1st Edition
9813278374, 978-9813278370
