Your division is considering two investment projects, each of which requires an

Question

Your division is considering two investment projects, each of which requires an upfront expenditure of $23 million. You estimate that the investments will produce the following net cash flows:

Year                   projectA                            projectB

1                        $5,000,000                         $20,000,000

2                         10,000,000                         10,000,000

3                         20,000,000                           6,000,000

What are the two projects IRR's if the cost of capital is 5%, 10%, and 15%?

I have a financial calculator which I jsut bought . What do I enter in my Financial Caluclator to get the IRR for each project? Thank you.

Explanation / Answer

Using Excel,

Note: IRR is independent of cost of capital

Project A Project B Outflow -23000000 -23000000 Inflow 5000000 20000000 Inflow 10000000 10000000 Inflow 20000000 6000000 IRR 19.29% 33.95%

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