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Exercise 5 : We present you with two investment projects, x and Y . Both projects have equal initial investments with equal durations and cash
Exercise :
We present you with two investment projects, and Both projects have equal initial investments with
equal durations and cash flows paid at the same time. However, the significant cash flows of one of the
projects occur earlier than those of the other. Consider the net present values of projects X and Y calculated
using the four discount rates:
a What is the Internal Rate of Return IRR of Project X Explain your answer.
b What is the discount rate that makes the two projects equivalent? Explain your answer.
c Which project has the lowest average cash flow? Explain your answer.
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