Homework SourseWhat is the IRR for each of these projects Do not round inte
What is the IRR for each of these projects? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)
Assume the required return is 8 percent. What is the NPV for each of these projects? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).)
Over what range of discount rates would you choose Project A? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)
Over what range of discount rates would you choose Project B? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g.,32.16).)
At what discount rate would you be indifferent between these two projects? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)
| Heurich, LLC, has identified the following two mutually exclusive projects: |
Solution
Requirement A -
Answer (b) As per IRR Rule Company Should Accept Project A
Requirement (b)
Requirement (3)
(A). The Project A should be Choosen over the discount Rate of 15.385%
(B). The Project B should be Choosen over the discount Rate of 14.734%
(C) The discount Rate at which both these projects are indiffrent Are 12.29%(approx)
| Project A | |||||||
| Year | Cash Flow | PVF@ 15% | PV | PVF@20% | PV | ||
| 0 | -90000 | 1 | -90000 | 1 | -90000 | ||
| 1 | 42000 | 0.870 | 36521.74 | 0.833 | 35000 | ||
| 2 | 33000 | 0.756 | 24952.74 | 0.694 | 22916.67 | ||
| 3 | 26000 | 0.658 | 17095.42 | 0.579 | 15046.30 | ||
| 4 | 21000 | 0.572 | 12006.82 | 0.482 | 10127.31 | ||
| NPV | 576.7204 | -6909.72 | |||||
| IRR | = | 15 + (576.72/7486.44)*5 | = | 15.385177 |
