a.Calculate the net present value for each project b.Compare the internal rate of return and net present value methods of investment evaluation.Do these methods always lead to comparable recommendation?If not,why not?
a.Calculate the net present value for each project b.Compare the internal rate of return and net present value methods of investment evaluation.Do these methods always lead to comparable recommendation?If not,why not?
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
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Question
Mr Charles Mongoery Burns,of Springfield Nuclear Power Plant Ltd,must make a choice between two mutually exclusive investments.The cash flow from these projects($,in '000's) and their internal rate of returns,are as follows
| Project | CF0 | CF1 | CF2 | CF3 | IRR |
| Red | -1000 | +300 | +500 | +650 | 18.5% |
| Yellow | -600 | +220 | +400 | +270 | 21.8% |
The company's oppurtunity cost of capital is 11% p.a.
a.Calculate the
b.Compare the
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