Better Health Inc. is evaluating two capital investments, each of which requires an up-front (Year 0) expenditure of $1.5 million. The projects are expected to produce the following net cash inflows:   Year Project A Project B 1 $ 500,000 $2,000,000 2 1,000,000 1,000,000 3 2,000,000 600,000     What is each project's IRR? What is each project's NPV if the opportunity cost of capital is 10 percent? 5 percent? 15 percent?

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
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Course Title: Principle Of Healthcare Finance

 

Problem: Better Health Inc. is evaluating two capital investments, each of which requires an up-front (Year 0) expenditure of $1.5 million. The projects are expected to produce the following net cash inflows:

 

Year

Project A

Project B

1

$ 500,000

$2,000,000

2

1,000,000

1,000,000

3

2,000,000

600,000

 

 

  1. What is each project's IRR?

  2. What is each project's NPV if the opportunity cost of capital is 10 percent? 5 percent? 15 percent?

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