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

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? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

Explanation / Answer

Project X Year Cash Flow (X) PV Factor @ 10% PV Factor @ 5% Present Value @ 10% Present Value @ 5% 1 6630 0.91 0.95 6027.27 6314.29 2 7210 0.83 0.91 5958.68 6539.68 3 4730 0.75 0.86 3553.72 4085.95 Total 15539.67 16939.92 Initial Investment 16700.00 16700.00 NPV 239.92 IRR = 5 + (239.92/(16939.92-15539.67))*5 = 5.86 % Project Y Year Cash Flow (Y) PV Factor @ 10% PV Factor @ 5% Present Value @ 10% Present Value @ 5% 1 7130 0.91 0.95 6481.82 6790.48 2 7810 0.83 0.91 6454.55 7083.90 3 3470 0.75 0.86 2607.06 2997.52 Total 15543.43 16871.89 Initial Investment 16700.00 16700.00 NPV 171.89 IRR = 5 + (171.89/(16871.89-15543.43))*5 = 5.65 % Crossover rate Year Cash Flow (X) Cash Flow (Y) Difference PV Factor @ 10% PV Factor @ 5% Present Value @ 10% Present Value @ 5% 1 6630 7130 500 0.91 0.95 454.55 476.19 2 7210 7810 600 0.83 0.91 495.87 544.22 3 4730 3470 -1260 0.75 0.86 -946.66 -1088.44 Total 3.76 -68.03 IRR = 5 + (-68.03/(-68.03-3.76))*5 = 9.74 %

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