Question
You are choosing between two projects. The cash flows for the projects are given in the following table ($ million): Project Year 0 Year 1
You are choosing between two projects. The cash flows for the projects are given in the following table ($ million):
| Project | Year 0 | Year 1 | Year 2 | Year 3 | Year 4 |
| A | negative $ 52$52 | $ 27$27 | $ 19$19 | $ 20$20 | $ 15$15 |
| B | negative $ 100$100 | $ 19$19 | $ 39$39 | $ 49$49 | $ 60$60 |
a. What are the IRRs of the two projects?
b. If your discount rate is
4.7 %4.7%,
what are the
NPVs
of the two projects?
c. Why do IRR and NPV rank the two projects differently?
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Property Finance
Authors: Giacomo Morri, Antonio Mazza
1st Edition
1118764404, 978-1118764404
