# What interest rate will make the NPV for the projects equal?

Matterhorn Mountain Gear is evaluating two projects with the following cash flows:

 Year Project X Project Y 0 −\$318,400 −\$297,300 1 146,600 137,550 2 164,100 154,750 3 129,200 120,500

What interest rate will make the NPV for the projects equal?

Multiple Choice
• 13.73%

• .34%

• 12.21%

• 18.80%

• 18.46%

Solution :

 Year Project X Project Y Difference between Project X and Project Y 0 -3,18,400 -2,97,300 -21,100 1 1,46,600 1,37,550 9050 2 1,64,100 1,54,750 9,350 3 1,29,200 1,20,500 8,700 IRR 13.73%

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