A company is evaluating two capital investments, each of which requires an up-front (year 0) expenditure of $1.5 million. The projects are expected to produce the following net cash inflows"
Project 1 Project 2
Year 1 - $500,000 $2,000,000
Year 2 -$1,000,000 $1,000,000
Year 3 -$2,000,000 $600,000
a. What is the project's IRR?
b. What is each project's NPV if the opportunity cost of capital is 10 percent? 5 percent? 15 percent?
The solution explains how to determine the NPV and IRR for the given projects