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ID: 1176104 • Letter: I
Question
Information provided below
Please do not use excel to solve this problem and complete all steps.
(Related to Checkpoint 11.1 and Checkpoint 11.4) (IRR and NPV calculation) The cash flows for three independent projects are found below: a. Calculate the IRR for each of the projects. b. If the discount rate for all three projects is 11 percent, which project or projects would you want to undertake? c. What is the net present value of each of the projects where the appropriate discount rate is 11 percent? a. The IRR of Project A is %. (Round to two decimal places.) The IRR of Project B is.%. (Round to two decimal places.) The IRR of Project C is %. (Round to two decimal places.) b. If the discount rate for all three projects is 1 1%, which project or projects would you want to undertake? (Select the best choice below.) 0 A. Project A and Project C O B. Project A and Project B C. None of the projects ? D. Project A, Project B, and Project C C. The net present value of Project A where the appropriate discount rate is 11% is S Round to the nearest dollar. The net present value of Project B where the appropriate discount rate is 11% is S (Round to the nearest dollar. The net present value of Project C where the appropriate discount rate is 11% is $D (Round to the nearest dollar.)Explanation / Answer
Answer a Calculation of IRR of the projects Year Project A Project B Project C Cash Flow Cash Flow Cash Flow 0 -$65,000.00 -$110,000.00 -$460,000.00 1 $9,000.00 $27,000.00 $240,000.00 2 $14,000.00 $27,000.00 $240,000.00 3 $19,000.00 $27,000.00 $240,000.00 4 $24,000.00 $27,000.00 5 $33,000.00 $27,000.00 IRR 12.86% 7.24% 26.24% The IRR of project A 12.86% The IRR of project B 7.24% The IRR of project C 26.24% Answer b If discount rate is 11% , I would like to undertake Project A and C as it has IRR more than 11% The answer is Option A. Answer c Calculation of NPV at 11% discount rate Year Project A Project B Project C Discount factor @ 11% Cash Flow Present Values Cash Flow Present Values Cash Flow Present Values 0 1.000000 -$65,000.00 -$65,000.00 -$110,000.00 -$110,000.00 -$460,000.00 -$460,000.00 1 0.900901 $9,000.00 $8,108.11 $27,000.00 $24,324.32 $240,000.00 $216,216.22 2 0.811622 $14,000.00 $11,362.71 $27,000.00 $21,913.81 $240,000.00 $194,789.38 3 0.731191 $19,000.00 $13,892.64 $27,000.00 $19,742.17 $240,000.00 $175,485.93 4 0.658731 $24,000.00 $15,809.54 $27,000.00 $17,785.74 $0.00 5 0.593451 $33,000.00 $19,583.89 $27,000.00 $16,023.19 $0.00 NPV $3,756.90 -$10,210.78 $126,491.53 NPV of Project A $3,756.90 NPV of Project B -$10,210.78 NPV of Project C $126,491.53