What is the IRR of Project X? (Do not round intermediate calculations. Enter you

Question

What is the IRR of Project X? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

What is the IRR of Project Y? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

What is the crossover rate for these two projects? Hint: see the crossover rate in my Excel file. (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

Explanation / Answer

a) For IRR, NPV=0

-16100 + 6690/(1+IRR) + 7270/(1+IRR)^2 + 4790/(1+IRR)^3 =0

IRR = 8.47%

b) For IRR, NPV=0

-16100 + 7250/(1+IRR) + 7750/(1+IRR)^2 + 3590/(1+IRR)^3 =0

IRR = 8.41%

c) For crossover rate, NPV of X= NPV of Y

-16100 + 6690/(1+R) + 7270/(1+R)^2 + 4790/(1+R)^3= -16100 + 7250/(1+IR) + 7750/(1+IR)^2 + 3590/(1+IR)^3

R= 9.67%

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