a. What are the IRRs of the two projects? b. If your discount rate is 4.8%, what are the NPVs of the two projects? c. Why do IRR and NPV rank the two projects differently?
a. What are the IRRs of the two projects? b. If your discount rate is 4.8%, what are the NPVs of the two projects? c. Why do IRR and NPV rank the two projects differently?
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter12: Capital Budgeting: Decision Criteria
Section: Chapter Questions
Problem 7P: Your division is considering two investment projects, each of which requires an up-front expenditure...
Related questions
Question
You are choosing between two projects. The cash flows for the projects are given in the following table ($ million):
Project
|
Year 0
|
Year 1
|
Year 2
|
Year 3
|
Year 4
|
A
|
−$51
|
$25
|
$19
|
$19
|
$17
|
B
|
−$98
|
$19
|
$40
|
$51
|
$60
|
a. What are the IRRs of the two projects?
b. If your discount rate is
4.8%,
what are the
NPVs
of the two projects?c. Why do IRR and NPV rank the two projects differently?
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