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  3. consider the following two projects: cash flows

Consider the following two projects: Cash flows Project A Project B C0 ?$ 280 ?$ 280 C1 120 148 C2 120 148 C3 120 148 C4 120 a.What are the internal rates of return on the two projects? b....

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Question

Finance

Consider the followingtwo projects:

CashflowsProject AProject B
C0?$280?$280
C1120148
C2120148
C3120148
C4120
  1. a.What are the internal rates of return on thetwo projects?
  2. b. If the opportunity cost of capital is 11%,what is the profitability index for each project?

Answer & Explanation Solved by verified expert
4.1 Ratings (501 Votes)
Project A IRR is the rate at which NPV 0 IRR 0256780467 Year 0 1 2 3 4 Cash flow stream 280 120 120 120 120 Discounting factor 1 125678 1579497 1985081 24948112 Discounted cash flows project 280 9548207 7597355 6045093 48099832 NPV Sum of discounted cash flows NPV Project A 0006376837 Where Discounting factor 1    See Answer
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Transcribed Image Text

Consider the followingtwo projects:CashflowsProject AProject BC0?$280?$280C1120148C2120148C3120148C4120a.What are the internal rates of return on thetwo projects?b. If the opportunity cost of capital is 11%,what is the profitability index for each project?

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