Mahjong, Inc., has identified the following two mutually exclusive projects: Yea

Question

Mahjong, Inc., has identified the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 –$36,400        –$36,400        1 18,710        6,310        2 14,210        12,810        3 11,710        19,310        4 8,710        23,310       Required: (a) What is the IRR for Project A? (b) What is the IRR for Project B? (c) If the required return is 12 percent, what is the NPV for Project A? (d) If the required return is 12 percent, what is the NPV for Project B? (e) At what discount rate would the company be indifferent between these two projects? Mahjong, Inc., has identified the following two mutually exclusive projects:

Explanation / Answer

NOW CALCULATE IRR BY USEING SPREAD SHEET (0,$12400 , $1400, -$7600, -$14600)

= 21%

SO AT 21% BOTH THE PROJECTS BE INDIFFRENT.

YEAR CASH FLOW (A) CASH FLOW (B) DIFFRENCE 0 ($36400) ($36400) 0 1 $18710 $6310 $12400 2 $14210 $12810 $1400 3 $11710 $19310 ($7600) 4 $8710 $23310 ($14600)

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