Calculate the IRR, the NPV, and the MIRR
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Project S has a cost of $10,000 and is expected to produce cash flows of $3,000 per year for 5 years. Project L costs $25,000 and is expected to produce cas flows of $7,400 per year for 5 years. Calculate the two projects' NPVs, IRRs, MIRRs, and PIs, assuming a cost of capital of 12 percent. Which project would be selected, assuming they are mutually exclusive, using each ranking method? Which should project should be selected?
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Solution Summary
This solution shows step-by-step calculations to determine the internal rate of return, net present value and the modified internal rate of return.
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Project S Project L
Year 0 -10000 -25000
Year 1 3000 7400
Year 2 3000 7400
Year 3 3000 7400
Year 4 3000 7400
Year 5 3000 7400
Cost of capital 12% 12%
NPV= $814.33 $1,675.34
IRR= 15.24% 14.67%
MIRR= 13.77% 13.46%
Present value of Future Cash ...
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