Homework Answers
a.
Using IRR function in Excel
| Time | Cash Flow A | Time | Cash Flow B |
| Year 0 | 2500 | Year 0 | 1800 |
| Year 1 | 3500 | Year 1 | 1600 |
| Year 2 | -6600 | Year 2 | -3600 |
| IRR | 6.9% | IRR | 3.8% |
Showing formula in excel
| Time | Cash Flow A | Time | Cash Flow B |
| Year 0 | 2500 | Year 0 | 1800 |
| Year 1 | 3500 | Year 1 | 1600 |
| Year 2 | -6600 | Year 2 | -3600 |
| IRR | =IRR(F4:F6) | IRR | =IRR(H4:H6) |
b.
As the interest rate on loan in option B, it should be selected as we need to pay less interest
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