Question
The following cash flows are given for two mutually exclusive projects, Project A and Project B. Project A requires an initial investment of $15,000 at
The following cash flows are given for two mutually exclusive projects, Project A and Project B. Project A requires an initial investment of $15,000 at time '0', and Project B needs an initial investment of $18,000 at time '0'.
Year | Project A | Project B |
1 | $5,000 | $9,000 |
2 | $7,000 | $6,000 |
3 | $8,000 | $5,000 |
4 | $6,000 | $4,000 |
Requirements:
- Calculate the NPV for each project using a discount rate of 10%.
- State your accept/reject decision.
- What would be your accept/reject decision if they were independent projects?
- Calculate the IRR for each project.
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Corporate Finance A Focused Approach
Authors: Michael C. Ehrhardt, Eugene F. Brigham
6th edition
1305637100, 978-1305637108
