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The following table contains projected cash flows for two mutually exclusive projects. Use the information for questions Part A-Part B. Year Project A Project B
| The following table contains projected cash flows for two mutually exclusive projects. Use the information for questions Part A-Part B. | ||||
| Year | Project A | Project B | ||
| 0 | -55000 | -55000 | ||
| 1 | 10000 | 7500 | ||
| 2 | 9000 | 7500 | ||
| 3 | 8000 | 7500 | ||
| 4 | 8000 | 7500 | ||
| 5 | 7500 | 8000 | ||
| 6 | 7500 | 9000 | ||
| 7 | 7500 | 9000 | ||
| 8 | 7500 | 10000 | ||
| Part A. Calculate NPVs for both project and for various interest rates. | ||||
| Annual Interest Rates | NPVA | NPVB | Which Project is preferred | |
| 4.22% | ||||
| 3.59% | ||||
| 2.51% | ||||
| Part B. Calculate IRRs for both project. | ||||
| IRR(A) | IRR(B) | Which project is preferred if the required rate is 5% | ||
|
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Investments
Authors: William F. Sharpe, Gordon J. Alexander, Jeffery V. Bailey
6th Edition
8120321014, 978-8120321014
