Question

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13-15 The after-tax cash flows for two mutually exclusive projects have been esti mated, and the following information has been provided: Expected Net Cash Flows Year Machine D Machine Q $(2,500) 2,000 900 100 100 $(2,500) 1,800 1,000 900 The company's required rate of return is 14 percent, and it can get unlimited funds at that cost. What is the IRR of the better project? (Hint: Note that the better project might not be the one with the higher IRR.

Answer 1

Soluhon- 3RR Role ; selee the prejecd with JRR jnalen he Ratun nafe calculation of .. . W-쁜 _ of Mchine D ahFoPMFGM $ (2,soo) 또 2S00) 0.8112 0 769S o.67497 2 $ 900 $ 692.Ss s 67.497 ¢ S9.21 3 し00

:rRR į),-|ke 9ate at ash ash inflow are equal to Co shoutflow Assumethe 1RR ·enantoge DCF elst Cashflow PUFO (61 (2soO) 2,50ひ o.862I 1724-2 0 85Ht 09 2 o-143 2 3 07 624 6 2.4H S337 SS 23 2s12.38 2482-66 ירו $2482-6 6 12512.38 29-12 29-32 _[2-32 io1 ect l Mattine D - 16% t 12-32 29-12

(alclol'on an Ca shtlow 0.8772 Boo 138S Io 674.97 S32.89 92.96 0. 6749 ד NPV Assome hat he t« Pv re 16Y 0.8021 1360 980.7432 337.76 657.50 0.6407 640.70 Yea DCF@(6% o 8696 O %00 0-657S 200 o.S718 2S 33 lo 247S S3 15% I 6、1 33 O Thuttu IRR of Machine Q (57. +33:10(5757

nof a PerfecPlotdune So, in Case YoTe onels 9° byoPRole Machine Q is better with an NPV 492.96 -S and TRR of ts sa