Your division is considering two investment projects, each of which requires an

Question

Your division is considering two investment projects, each of which requires an up-front expenditure of $17 million. You estimate that the investments will produce the following net cash flows:

a) What are the two projects' net present values, assuming the cost of capital is 5%? Round your answers to the nearest dollar.
Project A $ =
Project B $ =

b) What are the two projects' net present values, assuming the cost of capital is 10%? Round your answers to the nearest dollar.
Project A $ =
Project B $ =

c) What are the two projects' net present values, assuming the cost of capital is 15%? Round your answers to the nearest dollar.
Project A $ =
Project B $ =

d) What are the two projects' IRRs at these same costs of capital? Round your answers to two decimal places.
Project A  % =
Project B  % =

Year Project A Project B 1 $  6,000,000 $20,000,000 2 10,000,000 10,000,000 3 20,000,000 7,000,000

Explanation / Answer

Project A:

Net Present Value: (5%)

-$13,750,674.87

PV of Expected Cash flows:

$3,249,325.13

Net Present Value:(10%)

-$14,050,338.09

PV of Expected Cash flows:

$2,949,661.91

Net Present Value:(15%)

-$14,308,457.30

PV of Expected Cash flows:

$2,691,542.70

-$14,157,886.09

Project B

Net Present Value:

-$13,628,873.77

PV of Expected Cash flows:

$3,371,126.23

Net Present Value:

-$13,912,096.17

PV of Expected Cash flows:

$3,087,903.83

Net Present Value:

-$14,157,886.09

PV of Expected Cash flows:

$2,842,113.91

Project A 5% 10% 15% 6,00,000 20,00,000 10,00,000 NPV -$13,750,674.87 -$14,050,338.09 -$14,308,457.30

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