Using the IRR technique.

Define the technique.

Discuss the difference between this method and the payback method, discounted payback method, and NPV method.

Remember to carry out your answers at least two decimal places.

Year	Project A	Project B	Project C
2018	($3,000,000)	($3,000,000)	($3,200,000)
2019	$0	$975,000	$985,000
2020	$600,000	$975,000	$925,000
2021	$900,000	$975,000	$1,000,000
2022	$3,000,000	$1,000,000	$950,000

The projects are discounted at 10% rate

Project A

Year

Cash flows

Present Value Factor( C (1.10)-n)

Present Value

2018

($3,000,000)

2019

$0

0.9091

0

2020

$600,000

0.8264

495,867.77

2021

$900,000

0.7513

676,183.32

2022

$3,000,000

0.683

2,049,040.37

Total

3,221,091.46

Project B

Year

Cash flows

Present Value Factor( C (1.10)-n)

Present Value

2018

($3,000,000)

2019

$975,000

0.9091

886,363.64

2020

$975,000

0.8264

805,785.13

2021

$975,000

0.7513

732,531.93

2022

$1,000,000

0.683

683,013.46

Total

3,107,694.16

		Project C
Year	Cash flows	Present Value Factor( C (1.10)-n)	Present Value
2018	($3,200,000)
2019	$985,000	0.9091	895,454.55
2020	$925,000	0.8264	764,462.81
2021	$1,000,000	0.7513	751,314.80
2022	$950,000	0.683	648,862.78
			3,060,094.94
	NPV= $3,060,094- $3,200,000 = $-139,905.06

NPV= 3,107,694.16- 3,000,000= $107,694.16

NPV = $3,221,091.46-$3,000,000= $221,091.46