Question

Following is information on two alternative investments being considered by Jolee Company. The company requires a 11% return from its investments.
  

	Project A					Project B
Initial investment		$	(186,000	)			$	(131,000	)
Expected net cash flows in:
Year 1			46,500					38,500
Year 2			62,500					56,500
Year 3			86,795					72,500
Year 4			96,900					72,500
Year 5			71,500					72,500

Compute the internal rate of return for each of the projects using excel functions. (Round your answers to 2 decimal places.)

Answer 1

	Project A		Project B
Initial investment	-186,000		-131,000
Year 0	-186000		-131000
Year 1	46,500		38,500
Year 2	62,500		56,500
Year 3	86,795		72,500
Year 4	96,900		72,500
Year 5	71,500		72,500
	24.71%		33.48%
Excel function	IRR(Cashflows from year0 to year5)
Note: Function of calculating IRR in excel	Enter year 0 cash flow as negative to get correct answer.

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