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Calculating NPV and IRR of Mutually Exclusive Projects

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If a company is evaluating two mutually exclusive projects. Their cost of capital is 15 percent. Costs and cash flows are given in the following table. Which project should be accepted? Calculate NPV and IRR to formulate your decision.

Year Project 1 Project 2
0 ($1,250,000) ($1,250,000)
1 $250,000 $350,000
2 $350,000 $350,000
3 $450,000 $350,000
4 $500,000 $350,000
5 $750,000 $350,000

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Solution Summary

The solution calculates the NPV and IRR parameters of two mutually exclusive projects.

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  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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