Question
Consider two projects with identical initial outlays but differing cash flows. Project A Project B Year 0 -7,500,000 -7,500,000 Year 1 2,250,000 1,250,000 Year 2
Consider two projects with identical initial outlays but differing cash flows.
| Project A | Project B | |
| Year 0 | -7,500,000 | -7,500,000 |
| Year 1 | 2,250,000 | 1,250,000 |
| Year 2 | 2,500,000 | 2,250,000 |
| Year 3 | 2,750,000 | 3,250,000 |
| Year 4 | 2,750,000 | 3,750,000 |
The corporate cost of capital is 5.25%. What is the NPV, IRR and Modified IRR for each project? What are the undiscounted and discounted payback periods for each project? For extra credit (2 pts), why does Project A have a higher IRR, but lower MIRR than B (yes, that is a hint to the earlier answers)
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Finance In America An Unfinished Story
Authors: Kevin R. Brine, Mary Poovey
1st Edition
022650204X, 978-0226502045
