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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. 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
- 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: %
Expert Solution
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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