Please help figuring this problem out. Please show all formulas.
Project c0 c1 c2 c3
A -$20,000 +$8,000 +$8,000 +$8,000
B _$20,000 0 0 +$25,000.
a. At what interest rates would you prefer project A to B? Hint: try drawing the NPV profile of each project.
b. What is the IRR of each project?© BrainMass Inc. brainmass.com June 3, 2020, 6:02 pm ad1c9bdddf
You have to calculate the highest interest rate at which the NPV becomes negative for both the projects. The NPV profile is the changes in NPV as the interest rate rises. You can start with a rate of 1% and find the NPV and ...
The solution explains how we can use NPV profile to decide which project to prefer given different discount rates.