Calculate the IRR for each project Do not round intermediate

   

    

Calculate the IRR for each project. (Do not round intermediate calculations. Enter your answers as a percent 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 percent rounded to 2 decimal places, e.g., 32.16.)

  

Consider the following two mutually exclusive projects:

Solution

Year

Project X cash flow

0

-20900

1

9075

2

9550

3

9025

IRR =Using IRR function in MS excel =irr(-20900,9075,9550,9025)

15.42%

Year

Project Y cash flow

0

-20900

1

10550

2

8025

3

8925

IRR =Using IRR function in MS excel =irr(-20900,10550,8025,8925)

15.63%

Year

Project X cash flow

Project Y cash flow

Differential cash flow

0

-20900

-20900

0

1

9075

10550

1475

2

9550

8025

-1525

3

9025

8925

-100

Cross over rate =Using IRR function in MS excel =irr(0,1475,-1525,-100)

9.58%

Year	Project X cash flow
0	-20900
1	9075
2	9550
3	9025
IRR =Using IRR function in MS excel =irr(-20900,9075,9550,9025)	15.42%
Year	Project Y cash flow
0	-20900
1	10550
2	8025
3	8925
IRR =Using IRR function in MS excel =irr(-20900,10550,8025,8925)	15.63%
Year	Project X cash flow	Project Y cash flow	Differential cash flow
0	-20900	-20900	0
1	9075	10550	1475
2	9550	8025	-1525
3	9025	8925	-100
Cross over rate =Using IRR function in MS excel =irr(0,1475,-1525,-100)			9.58%