a. What are the IRRs of the two projects? b. If your discount rate is 4.8%, what are the NPVs of the two projects? c. Why do IRR and NPV rank the two projects differently?
a. What are the IRRs of the two projects? b. If your discount rate is 4.8%, what are the NPVs of the two projects? c. Why do IRR and NPV rank the two projects differently?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
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
|
Year 2
|
Year 3
|
Year 4
|
A
|
−$51
|
$25
|
$19
|
$19
|
$17
|
B
|
−$98
|
$19
|
$40
|
$51
|
$60
|
a. What are the IRRs of the two projects?
b. If your discount rate is
4.8%,
what are the
NPVs
of the two projects?c. Why do IRR and NPV rank the two projects differently?
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