Question

NPV

Your division is considering two investment projects, each of which requires an up-front expenditure of $23 million. You estimate that the investments will produce the following net cash flows:

Year	Project A	Project B
1	$  6,000,000	$20,000,000
2	10,000,000	10,000,000
3	20,000,000	8,000,000

1. 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 $
   
2. What are the two projects' IRRs at these same costs of capital? Round your answers to two decimal places.
   Project A     %
   Project B     %

Answer 1

PART A:

The following is the Excel Worksheet for the calculation of NPV at 5%

The following is the formula sheet of above Excel Worksheet for better understanding of formulas used:-

The following is the Excel Worksheet for the calculation of NPV at 10%

The following is the formula sheet of above Excel Worksheet for better understanding of formulas used:-

The following is the Excel Worksheet for the calculation of NPV at 15%

The following is the formula sheet of above Excel Worksheet for better understanding of formulas used:-

PART B:

The following is the Excel Worksheet for the calculation IRR of Project A and Project B

The following is the formula sheet of above Excel Worksheet for better understanding of formulas used:-

IRR can also be calculated manually by the following formula ( It gives approximate answer)

FOR PROJECT A:

The following is the Excel Worksheet for the calculation of NPV at 22%

The following is the formula sheet of above Excel Worksheet for better understanding of formulas used:-

Here lower discount rate =15%

Higher discount rate is = 22%

FOR PROJECT B:

The following is the Excel Worksheet for the calculation of NPV at 40%

The following is the formula sheet of above Excel Worksheet for better understanding of formulas used:-

Here lower discount rate =15%

Higher discount rate is = 40%