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Question 6 5 pts (Numbers in parentheses are negative) These two projects are independent. Year Cash Flow of A Cash Flow of B
Question 7 5 pts (Numbers in parentheses are negative) These two projects are independent. Year Cash Flow of A Cash Flow of B
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Answer #1

rate positively .

Ans 6
Year A B Delta
0 -5000 -2000 -3000
1 1000 1000 0
2 2000 1000 1000
3 2000 2000 0
4 2000 1000 1000
5 1000 -1000 2000
IRR of delta cash flow= 7.57% <using excel formula>
therefore cross over rate = 7.57%
Ans 7
Year A B PVIF @ 9.5% Present value A Present value B
0 -5000 -2000 1 (5,000.00) (2,000.00)
1 1000 1000 0.913242       913.24       913.24
2 2000 1000 0.834011    1,668.02       834.01
3 2000 2000 0.761654    1,523.31    1,523.31
4 2000 1000 0.695574    1,391.15       695.57
5 1000 -1000 0.635228       635.23     (635.23)
   1,130.95    1,330.91
Correct answer is option -
Both the project should be taken
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