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our division is considering two investment projects, each of which requires an up-front expenditure of $17...

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Finance

our division is considering two investment projects, each ofwhich requires an up-front expenditure of $17 million. You estimatethat the investments will produce the following net cash flows:

YearProjectAProjectB
1$ 4,000,000$20,000,000
210,000,00010,000,000
320,000,000

6,000,000

  1. What are the two projects' net present values, assuming the costof capital is 5%? Do not round intermediate calculations. Roundyour answers to the nearest dollar.

  2. Project A: $  

    Project B: $  

    What are the two projects' net present values, assuming the costof capital is 10%? Do not round intermediate calculations. Roundyour answers to the nearest dollar.

    Project A: $  

    Project B: $  

    What are the two projects' net present values, assuming the costof capital is 15%? Do not round intermediate calculations. Roundyour answers to the nearest dollar.

    Project A: $  

    Project B: $  

  3. What are the two projects' IRRs at these same costs of capital?Do not round intermediate calculations. Round your answers to twodecimal places.

    Project A:     %

    Project B:     %

    Answer & Explanation Solved by verified expert
    3.6 Ratings (625 Votes)
    YearProject AProject BCash FlowPV of CashFlowCash FlowPV of CashFlow0170000001700000017000000170000001400000040000001r120000000200000001r1210000000100000001r210000000100000001r2320000000200000001r3600000060000001r3Where rcost of capitalNtime of projecta r5005NPVProject A 400000010051 1000000010052 2000000010053 17000000 380952381 9070294785 1727675197 17000000    See Answer
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