Project Initial Investment Year 1 Cash Flow Year 2 Cash Flow Year 3 Cash Flow IRR A
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Question:
Project | Initial Investment | Year 1 Cash Flow | Year 2 Cash Flow | Year 3 Cash Flow | IRR |
A | $120,000 | $40,000 | $50,000 | $60,000 | 20% |
B | $150,000 | $55,000 | $60,000 | $70,000 | 18% |
The cost of capital is 14%.
a) Compute the NPV for both projects.
b) Which project should be chosen based on NPV and why?
c) Analyze the impact of the higher IRR on the final decision.
Related Book For
Fundamentals Of Corporate Finance
ISBN: 9780135811603
5th Edition
Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford
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