The NPV and the IRR criteria provide the same ranking of these two projects. |
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The NPV criterion recommends Project A while the IRR criterion recommends Project B. |
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The NPV criterion recommends Project B while the IRR criterion recommends Project A. |
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The NPV and IRR criteria provide different rankings, but suggest that both projects should be taken. |
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The NPV and IRR criteria provide the same ranking, but suggest that both projects should be taken. |
Correct Answer ia opion B
Project A has HIgher NPV, but the project B has higher IRR
If we have two mutually project we have to choose one those project
whose NPV is greater,
IRR is to be calculated in excel by formula
=IRR(values,[guess])
NPV = Pv of inflow - outflow
PV of inflow is calculated on excel by formula-
=PV(rate,nper,pmt,fv)
Project A
Year | Cashflow | Pv Of CF |
0 | -11000 | -11000.00 |
1 | 900 | 849.06 |
2 | 2000 | 1779.99 |
3 | 3000 | 2518.86 |
4 | 4000 | 3168.37 |
5 | 5000 | 3736.29 |
NPV | 1052.57 | |
IRR | 8.75% |
Project- B
Year | Cashflow | Pv Of CF |
0 | -15000 | -15000.00 |
1 | 7000 | 6603.77 |
2 | 5000 | 4449.98 |
3 | 3000 | 2518.86 |
4 | 2000 | 1584.19 |
5 | 1000 | 747.26 |
NPV | 904.06 | |
IRR | 9.05% |
I hope this clear your doubt.
Feel free to comment if you still have any query or need something else. I'll help asap.
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