\\ Compute the internal rate of return for the cash flows of the following two projects....

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Compute the internal rate of return for the cash flows of the following two projects. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

Year	Project A		Project B
0	–$	6,300	–$	3,900
1		2,400		1,400
2		3,200		2,500
3		2,000		1,600

Expert Solution

Project A
IRR is the rate at which NPV =0	0
IRR	10.27%
Year	0	1	2	3
Cash flow stream	-6300.000	2400.000	3200.000	2000.000
Discounting factor	1.000	1.103	1.216	1.341
Discounted cash flows project	-6300.000	2176.515	2631.787	1491.699
NPV = Sum of discounted cash flows
NPV Project A =	0.000
Where
Discounting factor =	(1 + discount rate)^(Corresponding period in years)
Discounted Cashflow=	Cash flow stream/discounting factor

Project B
IRR is the rate at which NPV =0	0
IRR	18.86%
Year	0	1	2	3
Cash flow stream	-3900.000	1400.000	2500.000	1600.000
Discounting factor	1.000	1.189	1.413	1.679
Discounted cash flows project	-3900.000	1177.817	1769.455	952.728
NPV = Sum of discounted cash flows
NPV Project B =	0.000
Where
Discounting factor =	(1 + discount rate)^(Corresponding period in years)
Discounted Cashflow=	Cash flow stream/discounting factor

jeff jeffy answered 1 year ago

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