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Consider the following two mutually exclusive projects: Year Cash Flow (X) Cash Flow

Consider the following two mutually exclusive projects: Year Cash Flow (X) Cash Flow

Consider the following two mutually exclusive projects:

   

Year Cash Flow
(X)
  Cash Flow
(Y)
0 Ac€?o$ 19,600     Ac€?o$ 19,600  
1   8,750       9,900  
2   8,900       7,700  
3   8,700       8,600  
 

    

Calculate the IRR for each project. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

   

  IRR
  Project X %  
  Project Y %
 

   

What is the crossover rate for these two projects? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

  

  Crossover rate %
What is the NPV of Projects X and Y at discount rates of 0%, 15%, and 25%? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
Discount rate Project X Project Y
0% $    $   
15% $    $   
25% $    $   
 
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1 Approved Answer

 
Mohit G 
 
5 Ratings, (9 Votes)
 
Answer A          
IRR          
Project X          
Year Cash flows Discount factor @ 15% Discounted Cash flows    
0  $  (19,600) 1  $                           (19,600)    
1  $     8,750                                    0.870  $                                7,609    
2  $     8,900                                    0.756  $                                6,730    
3  $     8,700                                    0.658  $                                5,720    
NPV      $                                   459    
           
Project X          
Year Cash flows Discount factor @ 25% Discounted Cash flows    
0  $  (19,600) 1  $                           (19,600)    
1  $     8,750                                    0.800  $                                7,000    
2  $     8,900                                    0.640  $                                5,696    
3  $     8,700                                    0.512  $                                4,454    
NPV      $                             (2,450)    
           
IRR = Lower rate add NPV at lower rate/NPV at lower rate less NPV at higher rate * Difference of rates
IRR = 15% add $ 459/$ 459 less ($ 2,450) * 10      
IRR = 16.577 %        
           
Project Y          
Year Cash flows Discount factor @ 15% Discounted Cash flows    
0  $  (19,600) 1  $                           (19,600)    
1  $     9,900                                    0.870  $                                8,609    
2  $     7,700                                    0.756  $                                5,822    
3  $     8,600                                    0.658  $                               ...
 
 
Abhinav 03-Dec-2019

Answer (UnSolved)

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