Cash flows ($) Project Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 IRR NPV (%) -1,000 -2,000 A 100 120 130 140 1,200 13.27% 128.5 180 210 250 300 2,400 12.78% 220.1 The opportunity cost of capital is 10%. Projects are mutually exclusive. The projects are of different size. Use incremental IRR for the final decision. Explain the results.
Cash flows ($) Project Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 IRR NPV (%) -1,000 -2,000 A 100 120 130 140 1,200 13.27% 128.5 180 210 250 300 2,400 12.78% 220.1 The opportunity cost of capital is 10%. Projects are mutually exclusive. The projects are of different size. Use incremental IRR for the final decision. Explain the results.
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
Consider projects A and B.
The question is in the added file. Thank you.
Transcribed Image Text:Cash flows ($)
Project
Year 0
Year 1
Year 2
Year 3
Year 4
Year 5 IRR
NPV
(%)
A
-1,000
100
120
130
140
1,200
13.27%
128.5
В
-2,000
180
210
250
300
2,400
12.78% 220.1
The opportunity cost of capital is 10%. Projects are mutually exclusive. The projects
are of different size. Use incremental IRR for the final decision. Explain the results.
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