Question

​(​NPV,

​PI, and IRR

calculations​)

You are considering two independent​ projects, project A and project B. The initial cash outlay associated with project A is

​$50,000​

and the initial cash outlay associated with project B is

​$70,000

The required rate of return on both projects is

9

percent. The expected annual free cash inflows from each project are in the popup​ window:

Calculate the

NPV​,

PI​,

and IRR for each project and indicate if the project should be accepted.

   PROJECT A   PROJECT B
Initial Outlay   -50,000   -70,000
Inflow year 1   13,000   14,000
Inflow year 2   13,000   14,000
Inflow year 3   13,000   14,000
Inflow year 4   13,000   14,000
Inflow year 5   13,000   14,000
Inflow year 6   13,000   14,000

Answer 1