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Cash Flows for Two Mutually Exclusive Projects: NPV versus IRR
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Here are the cash flows for two mutally exclusive projects:
Project A: Co : -20,000 C1: +8,000 C2: +8000 C3: +8000
Project B: C0: -20,000 C1: 0 C2: 0 C3: +25,000
a. At what interest rates would you prefer project A to B?
b. What is the IRR of each project?
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Solution Summary
The solution discusses cash flows for two mutually exclusive projects - NPV vs. IRR.
Solution Preview
To answer part a we need to find that discount (interest) rate at which the NPV's of both the streams ...
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