Question

Here are the cash flows for two mutually exclusive projects: Project Co -$ 21,200 - 21,200 1 +$ 8,400 C2 +$8,400 0 B +$ 8,400 + 26,600 a. Given the following interest rates (0%, 2%, 4%, 6%, 8%, 10%, 12%, 14%, 16%, 18%, 20%), above what interest rates would you prefer project A to B? Interest rates above % | b. What is the IRR of each project? (Round your answers to 2 decimal places.) IRR Project A % Project B % |

Answer 1

1.
Interest rates above 6%

2.
IRR of Project A=9.17%
IRR of Project B=7.86%

NPV Profile 600000% 400000% IRR of A, 9.17% 200000% 0% NPV %o1 11% 18% 19% 20% -200000% Crossover rate, 5.46% -400000% -600000% -800000% Discount Rate IRR of B.7.86% NPV of A NPV of B