Question
The cash flows for three independent projects are found below: Project A Project B Project C Year 0 (Initial investment) $(70,000) $(110,000) $(400,000) Year 1
The cash flows for three independent projects are found below:
| Project A | Project B | Project C | ||||
| Year 0 (Initial investment) | $(70,000) | $(110,000) | $(400,000) | |||
| Year 1 | $9,000 | $26,000 | $240,000 | |||
| Year 2 | 14,000 | 26,000 | 240,000 | |||
| Year 3 | 22,000 | 26,000 | 240,000 | |||
| Year 4 | 27,000 | 26,000 | ||||
| Year 5 | 33,000 | 26,000 |
| |||
a.Calculate the IRR for each of the projects.
b.If the discount rate for all three projects is 9 percent, which project or projects would you want to undertake?
c.What is the net present value of each of the projects where the appropriate discount rate is 9 percent?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Inside And Outside Liquidity
Authors: Bengt Holmstroem, Jean Tirole
1st Edition
0262518538, 9780262518536
