The following two projects each have multiple sign changes. Therefore, there is

Question

The following two projects each have multiple sign changes. Therefore, there is a possibility that they may each exhibit multiple rates of return. If einv = 12% and efin = 6.0% determine the rate of return for each project. While doing your calculations ensure to include a plot of NPV versus i. All of your cells must be clearly labeled.

Project A

Project B

*NOTE* This problem should be done in Excel, but please, PLEASE explain the solution and process you followed to get the final answer for each project. I am completely lost on how to solve problems with multiple sign changes.

Year Cash Flow 0 -21,000 1 88,000 2 68,000 3 62,000 4 -31,000 5 30,000 6 55,000 7 65,000

Explanation / Answer

NPV = Cashflow /(1+Rate of return/100)year

PROJECT A

PROJECT B

Year Cash Flow NPV(6%) NPV(12%) 0 -21,000 -21,000 -21,000 1 88,000 83,018.87 74,123.99 2 68,000 60,519.76 57,277.63 3 62,000 52,056.40 49,267.66 4 -31,000 -24,554.90 -23,239.46 5 30,000 22,417.75 21,216.79 6 55,000 38,772.83 36,695.71 7 65,000 43,228.71 40,912.89

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