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You are choosing between two projects. The cash flows for the projects are given in the...

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Question

Finance

You are choosing between two projects. The cash flows for theprojects are given in the following table? ($ million):

Project

Year 0

Year 1

Year 2

Year 3

Year 4

A

?$49

$24

$20

$18

$13

B

?$100

$22

$38

$48

$62

a. What are the IRRs of the two? projects?

b. If your discount rate is

4.6%?,

what are the

NPVs

of the two? projects?

c. Why do IRR and NPV rank the two projects? differently?

Answer & Explanation Solved by verified expert
4.2 Ratings (776 Votes)
a IRR is the rate which makes the NPV as nil I have computed the IRRs using the trial and error approach Project A Year Cash flow 1r PVIF PV PVIF cash flow 0 4900 121866 100 4900 1 2400 0820573 1969 2 2000 067334 1347 3 1800 0552524 995 4 1300    See Answer
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