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Explain and show your work please! 3. Your division is considering two investment projects, each of...

Explain and show your work please!

3. Your division is considering two investment projects, each of which requires an up-front expenditure of 20 million. You estimate that the investment will produce the following net cash flows: Year Project A Project B 1 $5,000,000 $20,000,000 2 10,000,000 10,000,000 3 20,000,000 6,000,000 a. What are the two project’s net present values, assuming the cost of capital is 5%? 10%? 15%? b. What are the two projects’ IRRs at these same costs of capital? Show your work.

yes excel works

Solutions

Expert Solution

IRR DOES NOT CHANGE WITH COST OF CAPITAL. IRR WILL BE SAME AT COST OF CAPITAL.


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