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Homework answers / question archive / Your division is considering two investment projects, each of which requires an up-front expenditure of $23 million

Your division is considering two investment projects, each of which requires an up-front expenditure of $23 million

Finance

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:

Year Project A Project B

1 $ 5,000,000 $20,000,000

2 10,000,000 10,000,000

3 20,000,000 8,000,000

  1. What are the two projects' net present values, assuming the cost of capital is 5%?

Project A: $  

Project B: $  

2.What are the two projects' net present values, assuming the cost of capital is 10%? Do not round intermediate calculations.

Project A: $  

Project B: $  

3.What are the two projects' net present values, assuming the cost of capital is 15%? Do not round intermediate calculations.

Project A: $  

Project B: $  

4.What are the two projects' IRRs at these same costs of capital? Do not round intermediate calculations.

Project A:     %

Project B:     %

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1). NPV at 5% cost of capital for project A = $8,108,951.52

For project B = $12,028,614.62

2). NPV at 10% cost of capital for project A = $4,836,213.37

For project B = $9,456,799.40

3). NPV at 15% cost of capital for project A = $2,059,587.41

For project B = $7,212,870.88

4). IRR for project A = 19.29%

For project B = 37.15%

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