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Consider the following two mutually exclusive projects: Year Cash Flow (X) Cash Flow (Y) 0 –$ 20,900 –$ 20,900 1 9,075 10,550 2 9,550 8,025 3 9,025 8,925 A) Calculate the IRR for each project B) What...

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Finance

Consider the following two mutually exclusive projects:

YearCash Flow
(X)		Cash Flow
(Y)
0–$20,900–$20,900
19,07510,550
29,5508,025
39,0258,925

A) Calculate the IRR for each project

B)

What is the crossover rate for these two projects?

C) What is the NPV of Projects X and Y at discount rates of 0percent, 15 percent, and 25 percent?

Answer & Explanation Solved by verified expert
4.1 Ratings (602 Votes)
A CF X IRR is the rate at which NPV 0 IRR 0154224395 Year 0 1 2 3 Cash flow stream 20900 9075 9550 9025 Discounting factor 1 1154224 1332234 1537697 Discounted cash flows project 20900 7862423 7168411 5869167 NPV Sum of discounted cash flows NPV CF X 0000172921 Where Discounting factor 1 IRRCorresponding period in years Discounted Cashflow Cash flow streamdiscounting factor IRR 1542 CF Y IRR is the rate at which NPV 0 IRR 015626917 Year 0 1 2 3 Cash flow stream 20900 10550 8025 8925 Discounting factor 10000 1156269 1336958 1545884 Discounted cash flows project 20900 9124173 6002431 5773397 NPV Sum of discounted cash flows NPV CF Y 0000202099 Where Discounting    See Answer
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Transcribed Image Text

Consider the following two mutually exclusive projects:YearCash Flow(X)Cash Flow(Y)0–$20,900–$20,90019,07510,55029,5508,02539,0258,925A) Calculate the IRR for each projectB)What is the crossover rate for these two projects?C) What is the NPV of Projects X and Y at discount rates of 0percent, 15 percent, and 25 percent?

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