Project A and Project B have a cost of $24,000,000 today.Project A will have cas

Question

Project A and Project B have a cost of $24,000,000 today.Project A will have cash flow of $10,000,000 per year for three years whie project B will have cash flows of $15,000,000 the first year,$10,000,000 the second year and $7,000,000 the third .Calculate the NPV and the IRR for project A using 12% cost of capital and show your work by using two of the following methods (1) using the formula,(2) identifying all varaibles using the calcuators function keys,(3) using the steps on the calculator to calculate NPV and IRR.Note it is an annuity since the cash flowa are te same.

Explanation / Answer

year A B DF   @ 12% PV A PV B 0 -24000000 -24000000 1 -24000000 -24000000 1 10000000 15000000 0.892857 8928571.4 13392857 2 10000000 10000000 0.797194 7971938.8 7971938.8 3 10000000 7000000 0.71178 7117802.5 4982461.7 NPV 18312.682 2347257.7 IRR 12.044% 18.459%

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