Net Present Value Versus Internal Rate of Return
For discount factors use Exhibit 12B-1 and Exhibit 12B-2.
Skiba Company is thinking about two different modifications to its current manufacturing process. The after-tax cash flows associated with the two investments follow:
| Year | | Project I | | Project II |
| 0 | | $(100,000) | | $(100,000) |
| 1 | | 63,857 |
| 2 | 134,560 | 63,857 |
Skiba's cost of capital is 8%.
Required:
1. Compute the NPV and the IRR for each investment. Round present value calculations and your final NPV answers to the nearest dollar. Round IRR answers to the nearest whole percent.
NPV IRR
Project 1 $_____ _____%
Project 2 $_____ _____%
Exhibit 12B.1 Present Value of a Single Amount* 9 25 0.96154 0.95238 0.94340 0.93458 0.92593 0.91743 0.90909 0.8 344 62 0.81630 0.79383 0.77218 0.75131 0.71178 0.67497 0.64066 0.60863 0.57870 0.51200 0.45517 63552 0.59208 0.55229 0.51579 0.48225 0.40960 0.35013 0.85480 0.82270 0.79209 0.76290 0.73503 0.70843 0.68301 0.94205 0.88797 0.83748 0.79031 0.74622 0.7 0.66634 0.63017 0.59627 0.56447 0.50663 0.45559 0.41044 0.37043 0.33490 0.26214 0.2071 0.66506 0.62275 0.58349 0.54703 0.51316 0.45235 0.39964 0.35383 0.31393 0.27908 0.20972 0.15937 30503 0.26604 0.23257 0.16777 0.12259 8 0.92348 0.85349 0.78941 0.73069 0.67684 0.62741 0.58201 0.54027 0.50187 0.46651 0.40388 0.3505 7025 67556 0.61391 0.55839 0.50835 0.46319 0.42241 0.38554 0.32197 0.26974 0.226 0.19106 0.16151 0.10737 0.07254 11 0.89632 0.80426 0.72242 0.64958 0.58468 0.52679 0.47509 0.42888 0.38753 0.35049 0.28748 0.23662 0.19542 0.16192 0.13459 0.08590 0.0558 16846 0.13722 0.11216 0.06872 0.04292 0.66112 0.57748 0.50507 0.44230 0.38782 0.34046 0.29925 0.26333 0.20462 0.15971 0.12520 0.09 4301 0.64186 0.55526 0.48102 0.41727 0.36245 1524 0.27454 0.23939 0.18270 0.14010 0.10793 0.08352 0.06491 0.03518 8 2 4438 0.71416 0.60502 0.51337 0.43630 0.37136 0.31657 0.27027 0.23107 0.19784 0.14564 0.10780 0.08021 0.059 83602 0.70016 0.58739 0.49363 0.41552 0.35034 0.29586 0.25025 0.21199 0.17986 0.13004 456 0.06914 0.05083 0.03756 0.01801 0.00889 954 0.67297 0.55368 0.45639 0.376 0.31180 0.25842 0.21455 0.17843 0.14864 0.10367 0.07276 0.05139 0.03651 0.02608 0.01153 0.0052 894 0.29416 0.24151 0.19866 0.16370 0.13513 0.09256 0.06383 0.04430 0.03094 0.02174 0.00922 0.00405 22 0.80340 0.64684 0.52189 0.42196 0.34185 0.27751 0.22571 0.18394 0.15018 0.12285 0.08264 0.05599 0819 0.02522 00131, 000738 0.0031 5 24 0.78757 0.62172 0.49193 0.39012 0.31007 0.24 25 0.77977 0.60953 0.47761 0.37512 0.29530 0.23300 0.18425 0.14602 0.11597 0.09230 0.05882 0.03779 0.02447 0.01596 0.01048 0.00378 0.00142 19715 0.15770 0.12640 0.10153 0.06588 0.04308 0.02838 0.01883 0.01258 0.00472 0.00184 24 0.21981 0.17220 0.13520 0.10639 0.08391 0.05252 0.03315 0.0210 27 0.76440 0.58586 0.45019 0.34682 0.26785 0.20737 0.16093 0.12519 0.09761 0.07628 0.04689 0.02908 0.01818 0.01146 0.00728 0.00242 0.000 28 0.75684 0.57437 0.43708 0.33348 0.25509 0.19563 0.15040 0.11591 0.08 4 0.06934 0.04187 0.02551 0.01567 0.00971 0.00607 0.00193 0.00065 11 0.42435 0.32065 0.24295 0.18456 0.14056 0.10733 0.08215 0.06304 0.03738 0.02237 0.01351 0.00823 0.00506 0.00155 0.00050 3 0
