You are considering the following two mutually exclusive projects. The required

Question

You are considering the following two mutually exclusive projects. The required rate of return is 14.6 percent for project A and 13.8 percent for project B. Which project should you accept and why? project A: because it has the higher required rate of return project B: because it has the largest total cash inflow project A: because its NPV is about $4,900 more than the NPV of project B project B: because it has the lower required return project B: because it has the largest cash inflow in year one What is the net present value of a project that has an initial cash outflow of $34,900 and the following cash inflows? The required return is 15.35 percent. What is the IRR of the following set of cash flows?

Explanation / Answer

7) NPV = -34900 + 12500/1.1535 + 19700 / 1.1535^2 + 0 + 10400/1.1535^4

= - $3383.25

8) IRR: (Using excel function)

= 19.18%

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