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The following table shows the forecast cash flows for two projects: C0 C1 C2 C3 C4 C5 A $1,200 $40 $40 $40 $40 $1,360 B
The following table shows the forecast cash flows for two projects: C0 C1 C2 C3 C4 C5 A $1,200 $40 $40 $40 $40 $1,360 B 1,200 111 110 1,150 Now suppose that the term structure is upward sloping and investors demand a higher return on the more distant flows as in the following table: t 1 2 3 4 5 rt 4.0% 4.5% 5.0% 5.5% 6.0% a-1. Calculate the IRR on the two projects. a-2. Calculate the NPV on the two projects. a-3. Do the two measures give the same ranking for the two projects?
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