Question

Year	Project A	Project B
1	-400	-650
2	-528	210
3	-219	210
4	-150	210
5	1100	210
6	820	210
7	990	210
8	-325	210

WACC 10%

What is NPV,IRR, for both projects and also solve for the crossover rate.

Answer 1

CALCULATION OF NPV,IRR AND CROSS OVER RATE
A	B	C	D	DISCOUNTED CASHFLOW		DIFFEERENCE IN CASHFLOW(G)
Year	Project A	Project B	DISOUNT FACTOR AT 10%	PROJECT A	PROJECT B
1	-400	-650	0.909	-363.6	-590.85	250
2	-528	210	0.826	-436.128	173.46	-738
3	-219	210	0.751	-164.469	157.71	-429
4	-150	210	0.683	-102.45	143.43	-360
5	1100	210	0.621	683.1	130.41	890
6	820	210	0.564	462.48	118.44	610
7	990	210	0.513	507.87	107.73	780
8	-325	210	0.467	-151.775	98.07	-535
NET PRESENT VALUE (NPV)				435.028	338.4
INTERNAL RATE OF RETURN FORMULS, =IRR(B4:B11) &=IRR(C4:C11)*				21%	26%
CROSS OVER RATE , FORMULA, =IRR(G4:G11)#						15%
*IRR IS THE RATE AT WHICH NV OF THE PROJECT EQUALS TO ZERO
EQUATION IS , NPV= Σ(CASHFLOW/(1+R)ˆt)
#CROSS OVER RATE IS THE RATE AT NPV OF ONE PROJECT EQUALS THE OTHER
EQUTION IS NPV OF PROJECT A = NPV OF PROJECT B
ie, Σ(CASHFLOW OF PROJECT A /(1+R)ˆt)=Σ(CASHFLOW OF PROJECT B/(1+R)ˆt)
CONCLUSION:
NPV OF PROJECT A		435.028
NPV OF PROJECT B		338.4
IRR OF PROJECT A		21%
IRR OF PROJECT B		26%
CROSS OVER RATE		15%