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Better Health Inc
Better Health Inc. is evaluating two capital investments, each of which requires an up-front (Year 0) expenditure of $1.5 million. The projects are expected to produce the following net cash inflows:
Year ProjectA Project B
1 $ 500,000 $2,000,000
2 1,000,000 1,000,000
3 2,000,000. 600,000
a) What is each project's IRR?
b) What is each project's NPV if the opportunity cost of capital is 10 percent? 5 percent? 15 percent?
Expert Solution
a) IRR of project A = 43.97%
IRR of project B = 82.03%
b) NPV at 10% cost of capital ;
- Project A = $1,283,621.34
- Project B = $1,595,416.98
NPV at 5% cost of capital ;
- Project A = $1,610,895.15
- Project B = $1,830,093.94
NPV at 15% cost of capital ;
- Project A = $1,005,958.74
- Project B = $1,389,783.84
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