In: Finance
Your division is considering two investment projects, each of which requires an up-front expenditure of $17 million. You estimate that the investments 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 | 7,000,000 |
What are the two projects' net present values, assuming the cost
of capital is 5%? Round your answers to the nearest dollar.
Project A $ ??
Project B $ ??
What are the two projects' net present values, assuming the cost of
capital is 10%? Round your answers to the nearest dollar.
Project A $ ??
Project B $ ??
What are the two projects' net present values, assuming the cost of
capital is 15%? Round your answers to the nearest dollar.
Project A $ ??
Project B $ ??
What are the two projects' IRRs at these same costs of capital?
Round your answers to two decimal places.
Project A ?? %
Project B ?? %
1.Project A
Net present value is calculated using a financial calculator by inputting the below:
The net present value of cash flows is $14,108,951.52.
Project B
Net present value is calculated using a financial calculator by inputting the below:
The net present value of cash flows is $17,164,777.02.
2.Project A
Net present value is calculated using a financial calculator by inputting the below:
The net present value of cash flows is $10,836,213.37.
Project B
Net present value is calculated using a financial calculator by inputting the below:
The net present value of cash flows is $14,705,484.60.
4.Project A
Net present value is calculated using a financial calculator by inputting the below:
The net present value of cash flows is $8,059,587.41.
Project B
Net present value is calculated using a financial calculator by inputting the below:
The net present value of cash flows is $12,555,354.65.
5. Project A
Internal rate of return is calculated using a financial calculator by inputting the below:
The IRR of project is 36.12%.
Project B
Internal rate of return is calculated using a financial calculator by inputting the below:
The IRR of project is 67.46%.
In case of any query, kindly comment on the solution