Kerron Company is presented with the following two mutually exclusive projects.
ID: 2757881 • Letter: K
Question
Kerron Company is presented with the following two mutually exclusive projects. The required return for both projects is 18 percent.
What is the IRR for each project? (Do not round intermediate calculations. Enter your answers as a percentage rounded to 2 decimal places (e.g., 32.16).)
What is the NPV for each project? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).)
Kerron Company is presented with the following two mutually exclusive projects. The required return for both projects is 18 percent.
Explanation / Answer
Project M
Year
Cash flow
PV Factor @ 18%
PV
0
(141,000)
1.0000
(141,000.00)
1
63,400
0.8475
53,728.81
2
81,400
0.7182
58,460.21
3
72,400
0.6086
44,064.88
4
58,400
0.5158
15,253.90
IRR
33.93%
NPV
30,507.80
Project N
Year
Cash flow
PV Factor @ 18%
PV
0
(354,000)
1.0000
(354,000.00)
1
153,000
0.8475
129,661.02
2
179,000
0.7182
128,555.01
3
138,000
0.6086
83,991.06
4
109,000
0.5158
56,220.99
IRR
24.71%
NPV
44,428.08
As per NPV Project M is more profitable
As IRR Project B is better
But NPV is more relavant.
Project M
Year
Cash flow
PV Factor @ 18%
PV
0
(141,000)
1.0000
(141,000.00)
1
63,400
0.8475
53,728.81
2
81,400
0.7182
58,460.21
3
72,400
0.6086
44,064.88
4
58,400
0.5158
15,253.90
IRR
33.93%
NPV
30,507.80
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