In: Finance
0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | ||
Project A | -$300 | -$387 | -$193 | -$100 | $600 | $600 | $850 | -$180 | |
Project B | -$400 | $134 | $134 | $134 | $134 | $134 | $134 | $0 | |
Project Delta | |||||||||
#N/A | #N/A | #N/A | #N/A | #N/A | #N/A | #N/A | #N/A | ||
Crossover Rate = IRRΔ | #N/A | ||||||||
Project MIRR Calculations at WACC = 18% | |||||||||
WACC | 18.00% | ||||||||
MIRRA | #N/A | ||||||||
MIRRB | #N/A |
1. NPV
The NPV of both projects. Discount each cash flow to Period 0 and find their sum.
PROJECT A
Period Cash Flow / Discounted factor Discounted cash flow
0 -300 (1.11)0 -300
1 -387 (1.11)1 -348.65
2 -193 (1.11)2 -156.64
3 -100 (1.11)3 -73.12
4 600 (1.11)4 398.24
5 600 (1.11)5 356.07
6 850 (1.11)6 454.44
7 -180 (1.11)7 -86.7
Total NPV 240.64
PROJECT B
Period Cash Flow / Discounted factor Discounted cash flow
0 -400 (1.11)0 -400
1 -134 (1.11)1 120.72
2 -134 (1.11)2 108.94
3 -134 (1.11)3 97.81
4 -134 (1.11)4 88.16
5 -134 (1.11)5 79.76
6 -134 (1.11)6 75.66
7 0 (1.11)7 0
TOTAL NPV 171.05
IRR
The IRR can't be solved through traditional means, equation or algebra. A financial calculator is needed to solve this problem.
Project A
Find the cash flow editor and input the following.
Peirod Cash Flow
0 -300
1 -387
2 -193
3 -100
4 600
5 600
6 850
7 -180
Solving for IRR gives us 18.0967%