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Matterhorn Mountain Gear is evaluating two projects with the following cash flows: year project x project y 0 -319,400 -299,050 1 146,100 137,300 2 163,600 154,500 3 128,700 120,250 What interest rate...

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Finance

Matterhorn Mountain Gear is evaluating two projects with thefollowing cash flows:

yearproject xproject y
0-319,400-299,050
1146,100137,300
2163,600154,500
3128,700120,250

What interest rate will make the NPV for the projects equal?

a)14.22%

b)18.31%

c)12.64%

d).26%

e)18.05%

Answer & Explanation Solved by verified expert
4.4 Ratings (804 Votes)

Ans a) 14.22%

PROJECT X
Year Project Cash Flows (i) DF@ 14.22% DF@ 14.22% (ii) PV of Project A ( (i) * (ii) )
0 -319400 1 1                (3,19,400.00)
1 146100 1/((1+14.22%)^1) 0.876                  1,27,911.05
2 163600 1/((1+14.22%)^2) 0.767                  1,25,400.42
3 128700 1/((1+14.22%)^3) 0.671                     86,367.84
NPV                     20,279.31
PROJECT Y
Year Project Cash Flows (i) DF@ 14.22% DF@ 14.22% (ii) PV of Project A ( (i) * (ii) )
0 -299050 1 1                (2,99,050.00)
1 137300 1/((1+14.22%)^1) 0.876                  1,20,206.62
2 154500 1/((1+14.22%)^2) 0.767                  1,18,425.21
3 120250 1/((1+14.22%)^3) 0.671                     80,697.23
NPV                     20,279.31

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Transcribed Image Text

Matterhorn Mountain Gear is evaluating two projects with thefollowing cash flows:yearproject xproject y0-319,400-299,0501146,100137,3002163,600154,5003128,700120,250What interest rate will make the NPV for the projects equal?a)14.22%b)18.31%c)12.64%d).26%e)18.05%

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