Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You are choosing between two projects. The cash flows for the projects are given in the following table (5 million): Project Year 0 Year 1

image text in transcribed

You are choosing between two projects. The cash flows for the projects are given in the following table (5 million): Project Year 0 Year 1 - $51 $27 B - $100 $21 a. What are the IRRs of the two projects? b. If your discount rate is 5.2%, what are the NPVs of the two projects? c. Why do IRR and NPV rank the two projects differently? Year 2 $20 $39 Year 3 $20 552 Year 4 $13 $62 The IRR for project Ais%. (Round to one decimal place.) The IRR for project B is %. (Round to one decimal place.) b. If your discount rate is 5.2%, what are the NPVs of the two projects? If your discount rate is 5.2%, the NPV for project A is $million. (Round to two decimal places.) If your discount rate is 5.2%, the NPV for project B is 5 million. (Round to two decimal places.) c. Why do IRR and NPV rank the two projects differently? (Select from the drop-down menus.) 'NUP/IBR NVPline Vis measuring return on investment. Because returns do not scale with different levels of NPV and IRR rank the two projects differently because they are measuring different things. Vis measuring value creation, while investment, the two measures may give different rankings when the initial investments are different. Enter your answer in each of the answer boxes

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Public Finance In Canada

Authors: Harvey Rosen, Beverly George Dahlby, Roger Smith, Jean-Francois Wen, Tracy Snoddon

3rd Canadian Edition

0070951659, 978-0070951655

More Books

Students also viewed these Finance questions

Question

What are the pros and cons regarding Angelica joining the union?

Answered: 1 week ago