a)A project has 6 million cashflow each year for 5years, payback period of 4 years and rate of return 11%. Solve for the project’s NPV, by showing all relevant workings. Verify your answer with an appropriate Excel function. Indicate whether you should proceed with the project.
a)A project has 6 million cashflow each year for 5years, payback period of 4 years and
Verify your answer with an appropriate Excel function. Indicate whether you should
proceed with the project.
(b) A company is evaluating two mutually exclusive projects A and B, and both have
conventional cashflows (i.e. all inflows after the initial outflow). Project A has an
of 14% and the NPV profiles of Project A and Project B cross-over at 10%.
Illustrate, using a graph or any other means, the range of values of cost of capital, when
the NPV rule and IRR rule will not lead to the same decision.
(c) Discuss the multiple issues of using IRR as a decision rule for choosing a project.
Step by step
Solved in 2 steps with 2 images
