given i) 12 8 ii) $90,128 iii) $40,718 FIND Sketch the NPV profile for proposals A, B and C Assume a linear relation between net present value and the discount rate (that is, use straight lines to connect the coordinates on the x and y axes) Mark all the relevant crossover point(s) on your sketch Give possible reasons for any apparent conflict between the recommendations made using the net present value and internal rate of return methods If there is no conflict explain why this is the case End of Year 0 1 2 3 4 5 6 7 Sum of cash flows Internal rate of return NPV (at 9 ) NPV (at 11 ) Proposal A $290,000 $100,000 $90,000 $80,000 $70,000 $60,000 $50,000 $40,000 $200,000 18 2 $79,549 $59,348 Proposal B $290,000 $40,000 $50,000 $60,000 $70,000 $80,000 $90,000 $100,000 $200,000 12 8 $45,064 $20,359 Proposal C $580,000 $80,000 $100,000 $120,000 $140,000 $160,000 $180,000 $200,000 $400,000 (i)

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Oct 03, 2024

given: i) 12.8% ii) $90,128 iii) $40,718 FIND: Sketch the NPV profile for proposals A, B and C. Assume a linear relation between net present

image text in transcribed

given:

i) 12.8%

ii) $90,128

iii) $40,718

FIND:

Sketch the NPV profile for proposals A, B and C. Assume a linear relation between net present value and the discount rate (that is, use straight lines to connect the coordinates on the x and y axes). Mark all the relevant crossover point(s) on your sketch.
Give possible reasons for any apparent conflict between the recommendations made using the net present value and internal rate of return methods. If there is no conflict explain why this is the case.

End of Year 0 1 2 3 4 5 6 7 Sum of cash flows Internal rate of return NPV (at 9%) NPV (at 11%) Proposal A -$290,000 $100,000 $90,000 $80,000 $70,000 $60,000 $50,000 $40,000 $200,000 18.2% $79,549 $59,348 Proposal B -$290,000 $40,000 $50,000 $60,000 $70,000 $80,000 $90,000 $100,000 $200,000 12.8% $45,064 $20,359 Proposal C -$580,000 $80,000 $100,000 $120,000 $140,000 $160,000 $180,000 $200,000 $400,000 (i)