Question

compute the internal rate of return for the cash flows of the following two projects (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.):

year | project A | PROJECT B |

0 | -6800 | -4400 |

1 | 2600 | 1500 |

2 | 3400 | 2900 |

3 | 2200 | 1800 |

Answer #1

IRR is calculated using IRR function in excel.

year | project A | PROJECT B |

0 | -6800 | -4400 |

1 | 2600 | 1500 |

2 | 3400 | 2900 |

3 | 2200 | 1800 |

IRR | 10.23% | 18.68% |

At this Rate NPV is $0.

year | project A | Discount rate | Present value | PROJECT B | Discount rate | Present value |

0 | -6800 | 1 | -6800 | -4400 | 1 | (4,400.00) |

1 | 2600 | 0.90723097 | 2358.80052 | 1500 | 0.84264 | 1,263.95 |

2 | 3400 | 0.82306803 | 2798.43131 | 2900 | 0.71004 | 2,059.10 |

3 | 2200 | 0.74671281 | 1642.76818 | 1800 | 0.5983 | 1,076.94 |

NPV | 0.00 | - |

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