5) Matterhorn Mountain Gear is evaluating two projects with the following cash flows: Year 0 1 2 3 Project X -$ 317,200 147,200 164,700 129,800 Project Y -$295,200 137,850 155,050 120,800 What interest rate will make the NPV for the projects equal? |=(-317,200-(-295,200)) + (147,200-137,850)/(1+ IRR) + (164,700- 155,050) / (1 + 1 RR)² + (129, 800-120,800)/ (1 +1RR)³ - 0 = = 22,000 + 9,350 / (1+IRR) + 9,650/(1+ IRR)² +9,000/(1+IRR) ³ IRR = .1319 or 13.19%
5) Matterhorn Mountain Gear is evaluating two projects with the following cash flows: Year 0 1 2 3 Project X -$ 317,200 147,200 164,700 129,800 Project Y -$295,200 137,850 155,050 120,800 What interest rate will make the NPV for the projects equal? |=(-317,200-(-295,200)) + (147,200-137,850)/(1+ IRR) + (164,700- 155,050) / (1 + 1 RR)² + (129, 800-120,800)/ (1 +1RR)³ - 0 = = 22,000 + 9,350 / (1+IRR) + 9,650/(1+ IRR)² +9,000/(1+IRR) ³ IRR = .1319 or 13.19%
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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![5) Matterhorn Mountain Gear is evaluating two projects with the following cash flows:
Year
0
1
2
3
Project X
-$ 317,200
147,200
164,700
129,800
Project Y
-$295,200
137,850
155,050
120,800
What interest rate will make the NPV for the projects equal?
|=(-317,200-(-295,200)) + (147,200-137,850)/(1+ IRR) + (164,700-
155,050) / (1 + 1 RR)² + (129, 800-120,800)/ (1 +1RR)³
-
0 = = 22,000 + 9,350 / (1+IRR) + 9,650/(1+ IRR)² +9,000/(1+IRR) ³
IRR = .1319 or 13.19%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fad61fb23-6772-4c68-a944-71325d2213c5%2F81fce210-da37-4ae6-b1d7-e649b674fb70%2F8agel6z_processed.jpeg&w=3840&q=75)
Transcribed Image Text:5) Matterhorn Mountain Gear is evaluating two projects with the following cash flows:
Year
0
1
2
3
Project X
-$ 317,200
147,200
164,700
129,800
Project Y
-$295,200
137,850
155,050
120,800
What interest rate will make the NPV for the projects equal?
|=(-317,200-(-295,200)) + (147,200-137,850)/(1+ IRR) + (164,700-
155,050) / (1 + 1 RR)² + (129, 800-120,800)/ (1 +1RR)³
-
0 = = 22,000 + 9,350 / (1+IRR) + 9,650/(1+ IRR)² +9,000/(1+IRR) ³
IRR = .1319 or 13.19%
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