Framing Hanley, LLC, has identified the following two mutually exclusive project

Question

Framing Hanley, LLC, has identified the following two mutually exclusive projects:

A) What is the IRR for each of these projects?

B) Assume the required return is 15 percent. What is the NPV for each of these projects?

C) Over what range of discount rates would you choose Project A?

D) Over what range of discount rates would you choose Project B?

E) At what discount rate would you be indifferent between these two projects?

A) What is the IRR for each of these projects?

B) Assume the required return is 15 percent. What is the NPV for each of these projects?

C) Over what range of discount rates would you choose Project A?

D) Over what range of discount rates would you choose Project B?

E) At what discount rate would you be indifferent between these two projects?

Framing Hanley, LLC, has identified the following two mutually exclusive projects: A) What is the IRR for each of these projects? B) Assume the required return is 15 percent. What is the NPV for each of these projects? C) Over what range of discount rates would you choose Project A? D) Over what range of discount rates would you choose Project B? E) At what discount rate would you be indifferent between these two projects?

Explanation / Answer

a)

IRR for A= 29.11%

IRR for B= 26.34%

b)

NPV A =14,732.23

NPV B=14,611.14

C)

cf 0, 1,2,3,4=0,12900,2900,-10500,-11300 Compute IRR = 14.83%

above 14.83%

D) below 14.83%

E) 14.83%

year cfA cfB Difference 0 59000 59000 0 1 35000 22100 12900 2 29000 26100 2900 3 20500 31000 -10500 4 13800 25100 -11300

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