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You have calculated the NPV and IRR for two investment projects based on the costs and...

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Finance

You have calculated the NPV and IRRfor two investment projects based on the costs and cash flows, butyou can only select the best one to choose between project A, andProject B. Based on the following data, which one will you select,and why?

ProjectA                     ProjectB

NPV: $10,000 $9,000

IRR: 9 % 12%

PART B:

If you invested in every stocklisted on the New York Stock Exchange, would you be fullydiversified? Would you have eliminated all of the risks?Explain.

You must provide any in-textcitations as per the APA guide. Failure to comply with the APAstandard will cause a reduction in your grade.


Answer & Explanation Solved by verified expert
4.0 Ratings (752 Votes)
IRR indicates the rate of return achieved by the project This can be used as a hurdle rateThis means any project having IRR less than the required rate of return should be rejected NPV indicates wealth created by the project for the shareholders In this case Project A creates more wealth for the shareholders Hence Project A should be selected though its IRR is lower than IRR of Project B PROJECT A PART B    See Answer
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Transcribed Image Text

You have calculated the NPV and IRRfor two investment projects based on the costs and cash flows, butyou can only select the best one to choose between project A, andProject B. Based on the following data, which one will you select,and why?ProjectA                     ProjectBNPV: $10,000 $9,000IRR: 9 % 12%PART B:If you invested in every stocklisted on the New York Stock Exchange, would you be fullydiversified? Would you have eliminated all of the risks?Explain.You must provide any in-textcitations as per the APA guide. Failure to comply with the APAstandard will cause a reduction in your grade.

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