You are considering investment in the following projects. Assume that your discount rate is 12% per year for both projects. Project A’s cash flows Year 0 Year 1 Year 2 Year 3 Year 4 -$12,000 $7,000 $3,000 $2,000 $1,500   Project B’s cash flows Year 0 Year 1 Year 2 Year 3 Year 4 -$11,000 $6,000 $2,500 $1,500 $1,200 (a) Calculate IRR for project A and IRR for project B.  (b) Calculate NPV for project A and NPV for project B.  (c) If projects A and B are mutually exclusive which project will you accept, if any?

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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You are considering investment in the following projects. Assume that your discount rate is 12% per year for both projects.

Project A’s cash flows

Year 0

Year 1

Year 2

Year 3

Year 4

-$12,000

$7,000

$3,000

$2,000

$1,500

 

Project B’s cash flows

Year 0

Year 1

Year 2

Year 3

Year 4

-$11,000

$6,000

$2,500

$1,500

$1,200

(a) Calculate IRR for project A and IRR for project B. 

(b) Calculate NPV for project A and NPV for project B. 

(c) If projects A and B are mutually exclusive which project will you accept, if any?

 

 

 

 

 

 

 

 

 

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