Home / Questions / Garage Inc has identified the following two mutually exclusive projects Year Cash Flow
Garage, Inc., has identified the following two mutually exclusive projects:
Year | Cash Flow (A) | Cash Flow (B) | |||||
0 | -28,400 | -28,400 | |||||
1 | 13,800 | 4,000 | |||||
2 | 11,700 | 9,500 | |||||
3 | 8,900 | 14,600 | |||||
4 | 4,800 | 16,200 | |||||
a1. What is the IRR for each of these projects? A =17.13 % & B=16.59%.
b1. If the required return is 12 percent, what is the NPV for each of these projects? A=2633.93 & B= 3432.15
c. At what discount rate would the company be indifferent between these two projects? (I can't figure this out! )
II
An investment has an installed cost of $533,800. The cash flows over the four-year life of the investment are projected to be $215,850, $232,450, $199,110, and $147,820.
1.If the discount rate is infinite, what is the NPV?
2.At what discount rate is the NPV just equal to zero?
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