Question
Consider two investment projects. Project A is built in one year at an initial cost of $10,000. It then yields the following decreasing stream of
Consider two investment projects. Project A is built in one year at an initial cost of $10,000. It then yields the following decreasing stream of benefits over a five-year period: $5000, $4000, $3000, $2000, $1000. Project B is built in two years. Initial costs are $10,000 in the first year and $5000 in the second year. It then yields yearly profits of $6000 for the next four years.
Q. Make a chart of the present value of the two investments against discount rates ranging from 0% to 30%. What features of this chart correspond to the internal rates of return of the two projects?
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