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Finding NPV and IRR for a Project

Consider the following project cash flows:

Year ......................Project A...........Project B
0 investment.............-$200..............-$300
1...................................60..................200
2...................................70..................100
3...................................80..................100
4...................................80

1. Calculate the NPV of each project. Which project should be chosen if opportunity cost is 11%?
2. What are the internal rates of return on projects A and B?

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Solution Summary

This solution provides a detailed discussion covering the concepts of NPV and IRR. These concepts are defined, explained and found using their appropriate formulas. Furthermore, this solution also used a financial calculator to compute these values, to illustrate how to check your answers after computing them. The full solution is provided in an Excel spreadsheet which is attached.

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