Explore BrainMass
Share

Explore BrainMass

    Capital Budgeting : NPV and IRR methods

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    The projected cash flows for two mutually exclusive projects are as follows:
    Year Project A Project B
    0 ($150,000) ($150,000)
    1 0 50,000
    2 0 50,000
    3 0 50,000
    4 0 50,000
    5 250,000 50,000

    If the cost of capital is 10%, the decidedly more favorable project is:
    a. project B with an NPV of $39,539 and an IRR of 19.9%.
    b. project A with an NPV of $5,230 and an IRR of 10.8%.
    c. project A with an NPV of $39,539 and an IRR of 10.8%.
    d. project B with an NPV of $5,230 and an IRR of 19.9%.

    © BrainMass Inc. brainmass.com October 10, 2019, 4:30 am ad1c9bdddf
    https://brainmass.com/business/capital-budgeting/capital-budgeting-npv-and-irr-methods-464604

    Solution Preview

    Please refer attached file for better clarity of tables.

    Cash Flows
    Year Project A Project B PV Factor, PVF PV - Project A PV - Project B
    n Ca Cb 1/(1+10%)^n Ca*PVF Cb*PVF
    0 -150000 ...

    Solution Summary

    Solution describes the steps to calculate NPV and IRR in the given cases.

    $2.19