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Calculating NPV, IRR and MIRR,PI of given projects

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Project S has a cost of $10,000 and is expected to produce benefits (cash flows) of $3000 per year for 5 years. Project L costs $25,000 and is expected to produce cash flows of $7400 per year for 5 years. Calculate the two projects, NPV, IRRs, MIRR and PI, assuming a cost of capital of 12%.

Which project would be selected, assuming they are mutually exclusive, using each ranking method?

Which should actually be selected?

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Solution Summary

Solution describes the steps to calculate NPV, IRR, MIRR and PI of given projects. It also determines the better project.

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Please refer attached file for better clarity of formulas in MS Excel.

1. Project's NPV?

Project S Project L
Year End(n) Cash flow (C) PV=C/(1+12%)^n Year End(n) Cash flow (C) PV=C/(1+12%)^n
0 -10000 -10000.00 0 -25000 -25000.00
1 3000 2678.57 1 7400 6607.14
2 3000 2391.58 2 7400 5899.23
3 3000 2135.34 3 7400 5267.17
4 3000 1906.55 4 7400 4702.83
5 ...

Solution provided by:
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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