Consider two mutually exclusive projects A and B: Cash Flows (dollars) Project C0 C1 C2 NPV...

Consider two mutually exclusive projects A and B:

	Cash Flows (dollars)
Project	C₀	C₁	C₂	NPV at 12%
A	−31,000	21,800	21,800	+$5,843
B	−51,000	34,000	34,000	+6,462

a. Calculate IRRs for A and B. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)

Solutions

Expert Solution

Project A

Internal rate of return can be calculated using a financial calculator by inputting the below:

Press the CF button.
CF0= -$31,000. The initial cash flow is indicated by a negative sign since it is a cash outflow.
Cash flow for each of the fifteen years should be entered.
Press Enter and down arrow after inputting each cash flow.
After entering the last cash flow cash flow, press the IRR and CPT button to get the IRR of the project.

The IRR of the project is 26.09%.

Project B

Internal rate of return can be calculated using a financial calculator by inputting the below:

Press the CF button.
CF0= -$51,000. The initial cash flow is indicated by a negative sign since it is a cash outflow.
Cash flow for each of the fifteen years should be entered.
Press Enter and down arrow after inputting each cash flow.
After entering the last cash flow cash flow, press the IRR and CPT button to get the IRR of the project.

The IRR of the project is 21.53%.

jeff jeffy answered 1 year ago

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