You are choosing between two projects. The cash flows for the projects are given in the following Data table ($ million): Project Year 0 Year 1 Year 2 Year 3 Year 4 A −$48 $27 $19 $22 $15 B −$100 $22 $39 $48 $62 The IRR for project A is __________________________%. (Round to one decimal place.) The IRR for project B is____________________________%. (Round to one decimal place.) If your discount rate is 5.4%, the NPV for project A is $_______________million. (Round to two decimal places.) If your discount rate is 5.4%, the NPV for project B is $______________ million. (Round to two decimal places.) NPV and IRR rank the two projects differently because they are measuring different things. ___________________is measuring value creation, while ___________________is measuring return on investment. Because returns do not scale with different levels of investment, the two measures may give different rankings when the initial investments are different.
You are choosing between two projects. The cash flows for the projects are given in the following Data table ($ million): Project Year 0 Year 1 Year 2 Year 3 Year 4 A −$48 $27 $19 $22 $15 B −$100 $22 $39 $48 $62 The IRR for project A is __________________________%. (Round to one decimal place.) The IRR for project B is____________________________%. (Round to one decimal place.) If your discount rate is 5.4%, the NPV for project A is $_______________million. (Round to two decimal places.) If your discount rate is 5.4%, the NPV for project B is $______________ million. (Round to two decimal places.) NPV and IRR rank the two projects differently because they are measuring different things. ___________________is measuring value creation, while ___________________is measuring return on investment. Because returns do not scale with different levels of investment, the two measures may give different rankings when the initial investments are different.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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6. You are choosing between two projects. The cash flows for the projects are given in the following Data table ($ million):
|
Project
|
Year 0
|
Year 1
|
Year 2
|
Year 3
|
Year 4
|
|
A
|
−$48
|
$27
|
$19
|
$22
|
$15
|
|
B
|
−$100
|
$22
|
$39
|
$48
|
$62
|
The IRR for project A is __________________________%.
(Round to one decimal place.)
The IRR for project B is____________________________%.
(Round to one decimal place.)
(Round to one decimal place.)
If your discount rate is 5.4%, the NPV for project A
is $_______________million.
(Round to two decimal places.)
(Round to two decimal places.)
If your discount rate is 5.4%, the NPV for project B is
$______________ million.
(Round to two decimal places.)
(Round to two decimal places.)
NPV and IRR rank the two projects differently because they are measuring different things.
___________________is measuring value creation, while
___________________is measuring return on investment. Because returns do not scale with different levels of investment, the two measures may give different rankings when the initial investments are different.
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