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 tableâ€‹ ($ million):
Project
Year 0
Year 1
Year 2
Year 3
Year 4
A
negative $ 50âˆ’$50
$ 23$23
$ 18$18
$ 22$22
$ 14$14
B
negative $ 100âˆ’$100
$ 18$18
$ 41$41
$ 48$48
$ 62$62
a. What are the IRRs of the twoâ€‹ projects?
b. If your discount rate is 4.9 %â€‹, what are the NPVs of thetwoâ€‹ projects?
c. Why do IRR and NPV rank the two projectsâ€‹ differently?
a. What are the IRRs of the twoâ€‹ projects?
The IRR for project A is ___â€‹%.
â€‹(Round to one decimalâ€‹ place.)

Answer & Explanation Solved by verified expert

3.8 Ratings (721 Votes)

aProject A Internal rate of return can be calculated using a financial calculator by inputting the below Press the CF button CF0 50 Indicate the initial cash flow by 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 last cash flow cash flow press the IRR button and enter the interest rate to get the IRR of the project See Answer

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Project	Year 0	Year 1	Year 2	Year 3	Year 4
A	negative $ 50âˆ’$50	$ 23$23	$ 18$18	$ 22$22	$ 14$14
B	negative $ 100âˆ’$100	$ 18$18	$ 41$41	$ 48$48	$ 62$62