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Calculating Net Value Present and IRR

You will compare three projects. The following table lists each projects initial outlay (price of the project) in year 0 (zero). The following years are the cash inflows. All projects receive the same total cash inflows. They differ on when the cash flows occur and the amount of the annual cash flow You will show your work in a Word document or Excel spreadsheet. You must submit your backup in Excel or other supporting documentation showing how answers were reached. Use the formula and the financial calculator or Excel to determine:

Given three projects with the following cash flows:

Project A Project B Project C
Year Cash Flow Cash Flow Cash Flow
0 -1000 -1000 -1000
1 200 500 350
2 300 400 350
3 400 300 350
4 500 200 350

1. Find the NPV, IRR and MIRR of each the projects with a cost of capital of 5%, 10%, and 12%.

2. Determine the payback period of each project.

3. Determine the acceptance of the projects if you have a capital budget of $3000, $2000. and $1000.

4. Compare the timing of the cash flows of each project relative to its NPV.

5. Compare how the timing and size of the cash flows change the net present value.

Solution Summary

This solution determines the NPV, IRR and MIRR for each project for the varying cost of capital rates. Similarly, payback period and project acceptance are calculated and discussed. The projects are compared whereby the earlier the cash inflows occur, the more time value of money those cash inflows have, thus creating a higher net present value. This solution is detailed in the attached Excel file.

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