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Net Present Value vs. Internal Rate of Return (#19) for cash flows of 2 projects

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Here are the cash flows for two mutually exclusive projects:

Project Co 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 poject A to B?
b. What is the Internal Rate of Return of each project?

Please show all work.

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Solution Summary

The sincinct solution displays the formulas and the answers in good form.

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a. At what interest rates would you prefer poject A to B?
Let Payment = 8000
FV = -25000
PV = 0
Number of periods = 3
compute Rate = 4.11%
Then if Rate < 4.11%, the PV of ...

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