Question

P10–24 All techniques: Decision among mutually exclusive investments  Pound Industries is attempting to select the best of three mutually exclusive projects. The initial investment and after-tax cash inflows associated with these projects are shown in the following table. PLEASE HELP; I DO NOT HAVE A FINANCIAL CALCULATOR AND I CANNOT USE EXCEL SPREADSHEETS; I HAVE A TI84 PLUS, PLEASE BREAK DOWN ON HOW TO GET THE IRR .... I REALLY DON'T UNDERSTAND. THANKS!

Cash flows	Project A	Project B	Project C
Initial investment (CF0)	−$60,000	−$100,000	−$110,000
Cash inflows (CFt), t = 1 to 5	20,000	31,500	32,500

1. Calculate the net present value (NPV) of each project, assuming that the firm has a cost of capital equal to 13%.
2. Calculate the internal rate of return (IRR) for each project.
3. Summarize the preferences dictated by each measure and indicate which project you would recommend. Explain why.

Answer 1

Hi, I have answered all the parts, attached related working and gave explanation aswell.Please get back to me for any other clarifications. Hope this helps!

a,b)

C)

Using the NPV the preference for accepting the project will be based on highest positive NPV to lowest positive NPV

so the preference will be, Project B, Project A, Project C

Using the IRR the preference for accepting the project will be based on higest IRR to lowest IRR which are greater than cost of capital(13%)

so the preference will be, Project A, Project B, Project C