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emmaraeschool
21.11.2019 •
Business
Consider the following two mutually exclusive projects:
year cash flow (x) cash flow (y)
0 −$ 15,600 −$ 15,600
1 6,740 7,350
2 7,320 7,700
3 4,840 3,690
1.what is the irr of project x?
2.what is the irr of project y?
3.what is the crossover rate for these two projects?
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Ответ:
1) The IRR of Project X is 10.81%
2) The IRR of Project Y is 10.87%
3) Cross over rate = 9.65%
Explanation:
1) 0 = -$ 15,600 + 6,740/[1+IRR] + 7,320/[1+IRR]^2 + 4,840/[1+IRR]^3
IRR = 10.81%
Therefore, The IRR of Project X is 10.81%
2) 0 = -$ 15,600 + 7,350/[1+IRR] + 7,700/[1+IRR]^2 + 3,690/[1+IRR]^3
IRR Y = 10.87%
Therefore, The IRR of Project Y is 10.87%
3) Cross over rate = 9.65% i.e the rate at which NPVs are equal
Ответ: