Finance Chapter 11 problem 11-12 1112. (Related to Checkpoint 11.1 on page 339 a

Question

Finance Chapter 11 problem 11-12
1112. (Related to Checkpoint 11.1 on page 339 and Checkpoint 11.4 on page 347) (IRR and
NPV calculation) The cash flows for three independent projects are found below:
Project A Project B Project C
Year 0 (Initial investment) $(50,000) $(100,000) $(450,000)
Year 1 $ 10,000 $ 25,000 $ 200,000
Year 2 15,000 25,000 200,000
Year 3 20,000 25,000 200,000
Year 4 25,000 25,000
Year 5 30,000 25,000
a. Calculate the IRR for each of the projects.
b. If the discount rate for all three projects is 10%, which project or projects would you
want to undertake?
c. What is the net present value of each of the projects where the appropriate discount
rate is 10%? 20%?

Explanation / Answer

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