NPV Your division is considering two investment projects, each of which requires
ID: 2715821 • Letter: N
Question
NPV
Your division is considering two investment projects, each of which requires an up-front expenditure of $23 million. You estimate that the investments will produce the following net cash flows:
What are the two projects' net present values, assuming the cost of capital is 5%? Round your answers to the nearest dollar.
Project A $ ________
Project B $ __________
What are the two projects' net present values, assuming the cost of capital is 10%? Round your answers to the nearest dollar.
Project A $ ___________
Project B $ ____________
What are the two projects' net present values, assuming the cost of capital is 15%? Round your answers to the nearest dollar.
Project A $ ___________
Project B $ ____________
What are the two projects' IRRs at these same costs of capital? Round your answers to two decimal places.
Project A % ______________
Project B %_____________
Explanation / Answer
Project A Particulars Year Cash Flows PVF @ 5% PVF @ 10% PVF @ 15% PV @ 5% PV @ 10% PV @ 15% Cash Outflow 0 -23000000 1 1.00 1.00 -2,30,00,000 -2,30,00,000 -2,30,00,000 Cash Inflow 1 6000000 0.95 0.91 0.87 57,14,286 54,54,545 52,17,391 Cash Inflow 2 10000000 0.91 0.83 0.76 90,70,295 82,64,463 75,61,437 Cash Inflow 3 20000000 0.86 0.75 0.66 1,72,76,752 1,50,26,296 1,31,50,325 Net Present Value 90,61,332 57,45,304.28 29,29,153 Project B Particulars Year Cash Flows PVF @ 15% PVF @ 10% PVF @ 15% PV @ 5% PV @ 10% PV @ 15% Cash Outflow 0 -23000000 1 1.00 1.00 -2,30,00,000.00 -2,30,00,000.00 -2,30,00,000.00 Cash Inflow 1 20000000 0.95 0.91 0.87 1,90,47,619.05 1,81,81,818.18 1,73,91,304.35 Cash Inflow 2 10000000 0.91 0.83 0.76 90,70,294.78 82,64,462.81 75,61,436.67 Cash Inflow 3 8000000 0.86 0.75 0.66 69,10,700.79 60,10,518.41 52,60,129.86 Net Present Value 1,20,28,614.62 94,56,799.40 72,12,870.88
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