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

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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 -$51 $26 $18 $22 $12
B -$102 $18 $40 $51 $58

b. If your discount rate is 4.8 %?, what are the NPVs of the two?projects? a. What are the IRRs of the two? projects?
c. Why do IRR and NPV rank the two projects? differently?

Answer & Explanation Solved by verified expert

3.8 Ratings (620 Votes)

aProject A Net present value is calculated using a financial calculator by inputting the below Press the CF button CF0 51 It is entered with a negative sign since it is a cash outflow Cash flow for each year should be entered Press Enter and down arrow after inputting each cash flow After entering the third cash flow cash flow press the NPV button and enter the discount rate of 48 Press enter after that Press the down arrow and See Answer

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Transcribed Image Text

You are choosing between two projects. The cash flows for theprojects are given in the following table? ($ million):projectYear 0Year 1Year 2Year 3Year 4A-$51$26$18$22$12B-$102$18$40$51$58b. If your discount rate is 4.8 %?, what are the NPVs of the two?projects? a. What are the IRRs of the two? projects?c. Why do IRR and NPV rank the two projects? differently?

project	Year 0	Year 1	Year 2	Year 3	Year 4
A	-$51	$26	$18	$22	$12
B	-$102	$18	$40	$51	$58