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Project A/B, NPV and IRR assuming cost of capital at 5, 10, 15%

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"Your division is considering two investment projects, each of which requires an up-front expenditure of $15 million. You estimate that the investments will produce the following net cash flows:

Year Project A Project B
1 $ 5,000,000 $20,000,000
2 10,000,000 10,000,000
3 20,000,000 6,000,000

a. What are the two projects' net present values, assuming the cost of capital is 5%? 10%? 15%?

b. What are the two projects' IRRs at these same cost of capital?"

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Solution Summary

Your suggested tutorial is attached in excel. I show the MIRR at the three levels of cost of capital. IRR does not use a cost of capital and that is shown for you too.

Solution provided by:
Carol Sargent, PhD
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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