FIN 325 MOD 5 QA 17

NPV and IRR analysis of projects Thomas Company is considering two mutually exclusive projects.The firm, which has a cost of capital of 14%, has estimated its cash flows as shown in the following table:. (1)

a. Calculate the NPV of each project, and assess its acceptability.

b. Calculate the IRR of each project, and assess its acceptability.

________________________________________________________________________________________________

a. The NPV of project A is $_________. (Round to the nearest cent.)

According to the NPV method, is project A acceptable? (Select the best answer below.)

YES ________

NO_________

The NPV of project B is $__________. (Round to the nearest cent.)

Is project B acceptable on this basis of NPV? (Select the best answer below.)

YES_________

No__________

b. The IRR of project A is ________%. (Round to two decimal places.)

Is project A acceptable on the basis of IRR? (Select the best answer below.)

YES_________

No__________

The IRR of project B is ________%. (Round to two decimal places.)

Is project B acceptable on the basis of IRR? (Select the best answer below.)

Yes_________

No__________

1: Date Table

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Initial investmentProject AProject B

(CF=0)$130,000$104,000

YEAR (t)Cash inflows (CF {t})

1$25,000$40,000

2$25,000$45,000

3$30,000$25,000

4$60,000$20,000

5$60,000$25,000