Homework SourseCalculate 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
Project X
IRR = 16.57% (use IRR function in Excel)
NPV at 0% = 6,750.00
NPV at 15% = 506.80
NPV at 25% = -2,379.20
Project Y:
irr = 16.68%
NPV at 0% = 6,600
NPV at 15% = 528.00
NPV at 25% = -2,286.40
Use IRR in Excel
Cross over rate = 12.62%
| Discount rate | 15.0000% | ||
| Cash flows | Year | Discounted CF= cash flows/(1+rate)^year | Cumulative cash flow |
| (19,400.000) | 0 | (19,400.00) | (19,400.00) |
| 8,700.000 | 1 | 7,565.22 | (11,834.78) |
| 8,800.000 | 2 | 6,654.06 | (5,180.72) |
| 8,650.000 | 3 | 5,687.52 | 506.80 |
