Question

NPV

Your division is considering two investment projects, each of which requires an up-front expenditure of $19 million. You estimate that the investments will produce the following net cash flows:

   Project A Project B

Year 1 $ 5,000,000 $20,000,000

Year 2 10,000,000 10,000,000

Year 3 20,000,000 7,000,000

What are the two projects' net present values, assuming the cost of capital is 5%? Round your answers to the nearest dollar. Project A $    Project B $   

What are the two projects' net present values, assuming the cost of capital is 10%? Round your answers to the nearest dollar. Project A $ Project B $   

What are the two projects' net present values, assuming the cost of capital is 15%? Round your answers to the nearest dollar. Project A $    Project B $

What are the two projects' IRRs at these same costs of capital? Round your answers to two decimal places. Project A % Project B    %

Answer 1

=IRR(B4:17) D E F PVIE PVIF@5% PVIF@10% PVIF@15% I B9 x fix A B C Cashflows 2 Year Project A Project B 3 A 4 0 $(19,000,000) $(19,000,000) 1 $ 5,000,000 $20,000,000 2. $ 10,000,000 $10,000,000 7 3 $ 20,000,000 $ 7,000,000 G H Discounted cash flows A 5% 10% AD AXE (19,000,000) $ (19,000,000) $ 4,761,905 $ 4,545,455 $ 9,070,295 $ 8,264,463 $ 17,276,752 $ 15,026,296 $ J Discounted cash flows B 5% 10% BxD Вх Е (19,000,000) $ (19,000,000) $ 19,047,619 $ 18,181,818 $ 9,070,295 $ 8,264,463 $ 6,046,863 $ 5,259,204 $ 1.000 0.952 0.907 0.864 1.000 0.909 0.826 0.751 15% AxF (19,000,000) $ 4,347,826 $ 7,561,437 $ 13,150,325 $ 1.000 $ 0.870 $ 0.756 $ 0.658 $ 15% BXF (19,000,000) 17,391,304 7,561,437 4,602,614 9 IRR 29.60% 54.69% Net present value $ 12,108,952 $ 8,836,213 $6,059,587 $ 15,164,777 $ 12,705,485 $ 10,555,355

*Please rate thumbs up