Question

Your firm is considering two projects with the following cash flows.
WACC	6%	6%
year	Project A	Project B
0	-55,000	-70,000
1	10,000	10,000
2	9,000	10,000
3	8,000	10,000
4	7,500	10,000
5	7,500	10,000
6	7,500	10,000
7	7,500	10,000
8	7,500	12,000
a. Calculate NPV and IRR for both projects
NPV
IRR
b. Do the following 2 questions (b-1 and b-2) on sheet 3 and change the name from Sheet 3 to "Datatable NPV IRR"
b-1. Calculate various of NPV with "date table" for project A and Project B respectively. Use the following information: WACC: 1%, 2%, 3%, 4%, 5%, 6%, and 7%,The initial invest of project A: 35,000, 45,000, 55,000, 65,000, 75,000, 85,000. The initial investment of project B: 40,000, 50,000, 60,000, 70,000, 80,000, 90,000 . (To help you, I have create a template in Sheet 3)
b-2 Use the above information of initial investment to create data tables of IRRs for Project A and project B respectively.

Answer 1

Answer a
Calculation of NPV
Year	Discount factor @ 6%	Project A		Project A
		Cash flow	Present Values	Cash flow	Present Values
0	1	-$55,000	-$55,000	-$70,000	-$70,000
1	0.943396	$10,000	$9,434	$10,000	$9,434
2	0.889996	$9,000	$8,010	$10,000	$8,900
3	0.839619	$8,000	$6,717	$10,000	$8,396
4	0.792094	$7,500	$5,941	$10,000	$7,921
5	0.747258	$7,500	$5,604	$10,000	$7,473
6	0.704961	$7,500	$5,287	$10,000	$7,050
7	0.665057	$7,500	$4,988	$10,000	$6,651
8	0.627412	$7,500	$4,706	$12,000	$7,529
NPV			-$4,313		-$6,647
NPV of Project A		-$4,313
NPV of Project B		-$6,647
Calculation of IRR
At IRR , NPV of project is equal to zero.
IRR of Project A		3.88%
IRR of Project B		3.59%