You are analyzing two mutually exclusive projects with the cash flows shown below. The cash flows are in millions. Both projects are equally risky. Your costs of capital are 10%. Project 1 -$180 Project 2 -$100 Year $50 $45 $40 $35 $30 $25 $20 $20 $20 $20 1 2 3 $20 $20 $20 $20 $20 $20 4 5 7 8 $15 $10 10 $5 -$10 a. Compute the NPVS of the two projects. b. Compute the IRRS of the two projects.
You are analyzing two mutually exclusive projects with the cash flows shown below. The cash flows are in millions. Both projects are equally risky. Your costs of capital are 10%. Project 1 -$180 Project 2 -$100 Year $50 $45 $40 $35 $30 $25 $20 $20 $20 $20 1 2 3 $20 $20 $20 $20 $20 $20 4 5 7 8 $15 $10 10 $5 -$10 a. Compute the NPVS of the two projects. b. Compute the IRRS of the two projects.
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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Transcribed Image Text:You are analyzing two mutually exclusive projects with the cash flows shown below. The
cash flows are in millions. Both projects are equally risky. Your costs of capital are 10%.
Project 1
-$180
Project 2
-$100
$20
$20
$20
$20
$20
$20
$20
$20
$20
-$10
Year
$50
$45
$40
$35
$30
$25
$20
$15
$10
$5
1
2
3
4
5
7
8
9
10
a. Compute the NPVS of the two projects.
b. Compute the IRRS of the two projects.
c. Compute the simple payback periods of the two projects.
d. Which project should you do? Briefly explain why.
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