Question
In: Finance
You are choosing between two projects. The cash flows for the projects are given in the...
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 |
$21 |
$22 |
$16 |
|
B |
−$98 |
$18 |
$41 |
$52 |
$58 |
a. What are the IRRs of the two projects?
b. If your discount rate is 4.9%, what are the NPVs of the two projects?
c. Why do IRR and NPV rank the two projects differently?
c. Why do IRR and NPV rank the two projects differently? (Select from the drop-down menus.)
NPV and IRR rank the two projects differently because they are measuring different things.
▼
NPVNPV
IRRIRR
is measuring value creation, while
▼
NPVNPV
IRRIRR
is measuring return on investment. Because returns do not scale with different levels of investment, the two meas
Solutions
Expert Solution
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jeff jeffy answered 1 month agoRelated Solutions
You are choosing between two projects. The cash flows for the projects are given in the...
You are choosing between two projects. The cash flows for the
projects are given in the following table ($ million):
Project
Year 0
Year 1
Year 2
Year 3
Year 4
A
−$52
$27
$19
$22
$17
B
−$100
$22
$41
$48
$61
a. What are the IRRs of the two projects?
b. If your discount rate is 5.4%, what are the NPVs of the two
projects?
c. Why do IRR and NPV rank the two projects differently?
You are choosing between two projects. The cash flows for the projects are given in the...
You are choosing between two projects. The cash flows for the
projects are given in the following table ($ million):
Project
Year 0
Year 1
Year 2
Year 3
Year 4
A
−$52
$27
$19
$18
$17
B
−$101
$19
$40
$51
$58
a. What are the IRRs of the two projects?
b. If your discount rate is 5.4%, what are the NPVs of the two
projects?
c. Why do IRR and NPV rank the two projects differently?
a. What...
You are choosing between two projects. The cash flows for the projects are given in the...
You are choosing between two projects. The cash flows for the
projects are given in the following table ($ million):
Project
Year 0
Year 1
Year 2
Year 3
Year 4
A
-$ 49
$ 24
$ 19
$ 20
$ 13
B
-$ 100
$ 18
$ 39
$ 48
$ 59
a. What are the IRRs of the two projects?
b. If your discount rate is
5.5 %
what are the
NPVs
of the two projects?
c. Why...
You are choosing between two projects. The cash flows for the projects are given in the...
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
-$48
$27
$ 21
$ 19
$ 12
B
−$98
$20
$ 41
$ 51
$ 59
a. What are the IRRs of the two projects? (Round to one
decimal place.)
b. If your discount rate is 4.7% what are the NPVs of the two
projects?
c. Why...
You are choosing between two projects. The cash flows for the projects are given in the...
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
$24
$18
$21
$17
B
−$102
$21
$38
$49
$61
a. What are the IRRs of the two projects?
b. If your discount rate is
5.1%,
what are the
NPVs
of the two projects?
c. Why do IRR and NPV rank the two projects differently?
You are choosing between two projects. The cash flows for the projects are given in the...
You are choosing between two projects. The cash flows for the
projects are given in the following table ($ million):
Project
Year 0
Year 1
Year 2
Year 3
Year 4
A
−$51
$26
$20
$18
$13
B
−$101
$22
$39
$49
$58
a. What are the IRRs of the two projects?
b. If your discount rate is
5.4%,
what are the
NPVs
of the two projects?
c. Why do IRR and NPV rank the two projects differently?
a. What...
You are choosing between two projects. The cash flows for the projects are given in the...
You are choosing between two projects. The cash flows for the
projects are given in the following table ($ million):
Project
Year 0
Year 1
Year 2
Year 3
Year 4
A
−$51
$26
$18
$19
$16
B
−$100
$20
$41
$51
$60
a. What are the IRRs of the two projects?
b. If your discount rate is
5.4%,
what are the
NPVs
of the two projects?
c. Why do IRR and NPV rank the two projects differently?
a. What...
You are choosing between two projects. The cash flows for the projects are given in the...
You are choosing between two projects. The cash flows for the
projects are given in the following table ($ million):
Project
Year 0
Year 1
Year 2
Year 3
Year 4
A
-$52
$24
$20
$21
$17
B
-$100
$18
$38
$51
$60
a. What are the IRRs of the two projects? The IRR for project A
is_______%. (Round to one decimal place.)
b. If your discount rate is 4.9%, what are the NPVs of the two
projects?______.
c. Why...
You are choosing between two projects. The cash flows for the projects are given in the...
You are choosing between two projects. The cash flows for the
projects are given in the following table ($ million):
Project
Year 0
Year 1
Year 2
Year 3
Year 4
A
−$51
$24
$21
$22
$12
B
−$102
$20
$38
$50
$58
a. What are the IRRs of the two projects?
b. If your discount rate is 5.4 %, what are the NPVs of the two
projects?
c. Why do IRR and NPV rank the two projects differently?
You are choosing between two projects. The cash flows for the projects are given in the...
You are choosing between two projects. The cash flows for the
projects are given in the following table ($ million): Project
Year 0 Year 1 Year 2 Year 3 Year 4 A negative $ 48−$48 $ 27$27 $
21$21 $ 21$21 $ 13$13 B negative $ 98−$98 $ 22$22 $ 39$39 $ 48$48 $
60$60 a. What are the IRRs of the two projects? b. If your
discount rate is 4.6 %4.6%, what are the NPVs of the two
projects?...
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