Posted by: storm93 February 3, 2006
MBA expert question.
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here is couple problem i was confused to get exact IRR, may be method that i did wrong. 1. The projected cash flows for two mutually exclusive projects are as follows: Year : 0 Project A=($150,000) Project B= ($150,000) Year :1 Project A = 0 Project B = 50,000 Year :2 Project A = 0 Project B =50,000 Year :3 Project A = 0 Project B =50,000 Year :4 Project A= 0 Project B =50,000 Year :5 Project A =250,000 Project B=50,000 If the cost of capital is 10%, the decidedly more favorable project is: a. project B with an NPV of $39,539 and an IRR of 19.9% b. project A with an NPV of $5,230 and an IRR of 10.8% c. project A with an NPV of $39,539 and an IRR of 10.8% d. project B with an NPV of $5,230 and an IRR of 19.9% 2. The following projects are all characterized by a single initial cash outflow (the initial investment) followed by a series of cash inflows. Rank them based on profitability index. Project A Investment:$160,000 NPV: $30,000 Project B Investment: $120,000 NPV $15,000 Project C Investment:$110,000 NPV:$25,000 Project D Investment: $200,000 NPV: $40,000 a. A, C, B, D b. C, D, A, B c. D, A, C, B d. B, D, C, A
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