Question

Garage, Inc., has identified the following two mutually exclusive projects. a. What is the IRR for each project? b. If the required return is 11 percent, what is the NPV for each project? c. What is the crossover rate between these two projects? A 0 Year o Year 1 Year 2 Year 3 Year 4 0 (43,500) 21,400 18,500 13,800 7,600 $ (43,500) 6,400 14,700 22,800 25,200 0 $ 0 Required return 11% Complete the following analysis. Do not hard code values in your calculations. You must use the built-in Excel functions to answer this question. Cash flow A IRR Cash flow B IRR

please use excel formula, Thank You in advance

Answer 1

A DE А Year o Year 1 Year 2 Year 3 Year 4 $ $ $ $ в (43,500) $ 21,400 $ 18,500 $ 13,800 $ 7,600 $ (43,500) 6,400 14,700 22,800 25,200 Required return 11% Cash flow A IRR Cash flow B IRR 18.33% 17.37% Cash flow A NPV Cash flow B NPV $ 5,891.09 $ 7,467.80 Difference in cash flows Year 0 Year 1 Year 2 Year 3 Year 4 uuuuu 15,000 3,800 (9,000) (17,600) Crossover rate 15.19%

Year 0 Year 1 Year 2 Year 3 Year 4 -43500 21400 18500 13800 7600 -43500 6400 14700 22800 25200 Required return 0.11 Cash flow AIRR Cash flow B IRR =IRR(D4:08) =IRR(E4:E8) Cash flow A NPV Cash flow B NPV =NPV(E10,D5:08)+D4 =NPV(E10,E5:E8)+E4 Year 0 Year 1 Year 2 Year 3 Year 4 Difference in cash flows =D4-E4 =D5-E5 =D6-E6 =D7-E7 =D8-E8 Crossover rate =IRR(D21:D25)