Question

Assignment 5 10-15

Cooper Electronics uses NPV profiles to visually evaluate competing projects. Key data for the two projects under consideration are given in the following? table:

Terra Firma

Initial investment  

$33,000   $30,000
Year Operating cash inflows  
1 $12,000   $10,000
2 $12,000   $8,000
3 $11,000   $12,000
4 $9,000   $9,000

Using these? data, graph, on the same set of? axes, the NPV profiles for each project using discount rates of

0?%, 8?%, and the IRR.

Answer 1

Rate	NPV for Project A	NPV for Project B
0%	$          11,000.00	$             9,000.00
8%	$             3,746.60	$             2,259.23
11.3175%	$             1,299.68	$                  (0.03)
13.245%	$                    0.07	$           (1,196.50)

NPV at 8% and IRR is given in below tables:

	0	1	2	3	4
Cashflow	$   (33,000.00)	$   12,000.00	$   12,000.00	$   11,000.00	$     9,000.00
Present Value	$   (33,000.00)	$   11,111.11	$   10,288.07	$     8,732.15	$     6,615.27
Net Present Value	$       3,746.60
IRR	13.2451%
	0	1	2	3	4
Cashflow	$   (30,000.00)	$   10,000.00	$     8,000.00	$   12,000.00	$     9,000.00
Present Value	$   (30,000.00)	$     9,259.26	$     6,858.71	$     9,525.99	$     6,615.27
Net Present Value	$       2,259.23
IRR	11.3175%