The following are the cash flows of two projects: Year 0 1 2 3 4 Project A $ (220) 100 100 100 100 Project A B Project B $ (220) 120 120 120 What are the internal rates of return on projects A and B? Note: Enter your answers as a percent rounded to 2 decimal places. IRR % %

The following are the cash flows of two projects: Year 0 1 2 3 4 Project A $ (220) 100 100 100 100 Project A B Project B $ (220) 120 120 120 What are the internal rates of return on projects A and B? Note: Enter your answers as a percent rounded to 2 decimal places. IRR % %

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

The following are the cash flows of two projects:
Year
0
1
2
3
4
Project A
$ (220)
100
100
100
100
Project B
$ (220)
120
120
120
What are the internal rates of return on projects A and B?
Note: Enter your answers as a percent rounded to 2 decimal places.
Project
A
B
IRR
%
%

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Bruin, Incorporated, has identified the following two mutually exclusive projects: Cash Flow (A) Cash Flow (6) -$ 28,000 -$ 28,000 3,900 9,300 Year 0 1 2 3 4 Project A Project B a-1 What is the IRR for each of these projects? (Do not round Intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) AN 13,400 11,300 8,700 4,600 Using the IRR decision rule, which project should the company accept? Project A Project B Ⓒ Project A O Project B Is this decision necessarily correct? 14,200 15,800 O No b- If the required return is 10 percent, what is the NPV for each of these projects? (Do 1. not round Intermediate calculations and round your answers to 2 decimal places, e.g. 32.16.) Which project will the company choose if it applies the NPV decision rule? O Project A O Project B Discount rate c. At what discount rate would the company be Indifferent between these two projects? (Do not round Intermediate calculations and enter your answer as a…
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