Calculate net present value (NPV) and internal rate of return (IRR) of both the investments.

Excel Applications for Accounting Principles
4th Edition
ISBN:9781111581565
Author:Gaylord N. Smith
Publisher:Gaylord N. Smith
ChapterMB: Model-building Problems
Section: Chapter Questions
Problem 15M
icon
Related questions
Question

Mrs Alis is an intelligent business woman. She makes her investments after a very thoughtful process. In  January 2018 , her manager has shown her some projects with the following details

Option A

Investment into a towel business that initially cost $200,000 and then will generate cash inflow of $24000 per year for the next 10 years

Option B

Investment into a detergent business that initially cost $190,000 and then will generate cash inflow of $20,000 for each of next 12 years.

The rate of return associated with both the investments is 12%.

  1. Calculate net present value (NPV) and internal rate of return (IRR) of both the investments.
  2. Comment on which investment Mrs Alis should pick on the basis NPV and IRR.
Expert Solution
steps

Step by step

Solved in 4 steps with 4 images

Blurred answer
Knowledge Booster
Future Value
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Excel Applications for Accounting Principles
Excel Applications for Accounting Principles
Accounting
ISBN:
9781111581565
Author:
Gaylord N. Smith
Publisher:
Cengage Learning