Discount Rate: NPV and IRR

Discount Rate: NPV and IRR

2. A company is evaluating between two mutually exclusive projects. The estimated cash flows are indicated below projects. The discount rate related to Project
A 12% and the discount rate related to Project B is 16%.

a. Assuming the company is trying to maximize NPV which project should it undertake?

b. Assume the company is trying to maximize the IRR, which project should it undertake?

Year Project A Project B

0 ($100,000) ($5,000)

1 $0 $1,500

2 $0 $1,500

3 $0 $1,500

4 $0 $1,500

5 $0 $1,500

6 $250,000 $3,000

Discount rate: 12% 16%

a) NPV: ________ _______

b) IRR: ________ _______

Is this the question you were looking for? If so, place your order here to get started!