Question

Mr. Cyrus Clops, the president of Giant Enterprises, has to make a choice between two possible...

  1. Mr. Cyrus Clops, the president of Giant Enterprises, has to make a choice between two possible investments:

Cash Flows ($ thousands)

Project

C0

C1

C2

IRR (%)

A

-400

+250

+300

23

B

-200

+140

+179

36

The opportunity cost of capital is 9%. Which project should Mr. Clops invest in?

(Use Excel & show functions)

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Homework Answers

Answer #1

We should find the NPV of these projects

Screenshot with formulas

NPV of Project A = $81,862

NPV of Project B = $79,101

Mr. Clops should invest in Project A because it has a higher NPV as compared to that of Project B.

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