b. What is the future (Year 5) value of the cash flow stream if the cash flows are invested in an account that 10% Rate Interest Ra FV $2,000 Year O CF $3,221.02 2,500 Value 1 Year 1 CF $3,660.25 O Value 1 Year 2 CF $0.00 1,500 Value 1 Year 3 CF $1,815.00 3,000 Value 1 Year 4 CF 4,500 Value 1 Year 5 CF $4,500.00 NPV $10,242.89 NFV $ 16,496.27 $16,496.27 Method I Method II CHAPTER 14: CAPITAL BUDGETING Homework 4.6, Chapter 14 Better Health, Inc. is evaluating two investment projects, each of which requires an up-front expenditure of $2.5 million. The projects are expected to produce the following net cash inflows: Year Project A 750,000 1,250,000 2,000,000 Project B 2,000,000 1,250,000 750,000 Nm a. What is each project's IRR? Year wNwo Project A -2,500,000 750,000 1,250,000 2,000,000 23.24% Project B -2,500,000 2,000,000 1,250,000 750,000 34.01% IRR b. What is each project's NPV if the cost of capital is 10%? Rate 10% Project A Project B NPV $ 717,505.63 $ 914,725.77 b. What is the future (Year 5) value of the cash flow stream if the cash flows are invested in an account that 10% Rate Interest Ra FV $2,000 Year O CF $3,221.02 2,500 Value 1 Year 1 CF $3,660.25 O Value 1 Year 2 CF $0.00 1,500 Value 1 Year 3 CF $1,815.00 3,000 Value 1 Year 4 CF 4,500 Value 1 Year 5 CF $4,500.00 NPV $10,242.89 NFV $ 16,496.27 $16,496.27 Method I Method II CHAPTER 14: CAPITAL BUDGETING Homework 4.6, Chapter 14 Better Health, Inc. is evaluating two investment projects, each of which requires an up-front expenditure of $2.5 million. The projects are expected to produce the following net cash inflows: Year Project A 750,000 1,250,000 2,000,000 Project B 2,000,000 1,250,000 750,000 Nm a. What is each project's IRR? Year wNwo Project A -2,500,000 750,000 1,250,000 2,000,000 23.24% Project B -2,500,000 2,000,000 1,250,000 750,000 34.01% IRR b. What is each project's NPV if the cost of capital is 10%? Rate 10% Project A Project B NPV $ 717,505.63 $ 914,725.77