# Finance Final Answers - NPV and IRR#9 A firm is analyzing...

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NPV and IRR Answer: e #9 i . A firm is analyzing two mutually exclusive projects with the following cash flows: Project A Project B Year Cash Flow Cash Flow 0 -\$50,000 -\$30,000 1 10,000 6,000 2 15,000 12,000 3 40,000 18,000 4 20,000 12,000 If the company’s WACC is 10%, what is the NPV of the project with the highest IRR? a. \$ 7,090 b. \$ 8,360 c. \$11,450 d. \$12,510 e. \$15,200

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i . NPV and IRR Answer: e Financial calculator solution: Project A: Inputs: CF 0 = -50000; CF 1 = 10000; CF 2 = 15000; CF 3 = 40000; CF 4 = 20000; I/YR = 10. Outputs: NPV = \$15,200.46 ≈ \$15,200; IRR = 21.38%. Project B: Inputs: CF 0 = -30000; CF 1 = 6000; CF 2 = 12000; CF 3 = 18000; CF 4 = 12000; I/YR = 10. Outputs: NPV = \$7,091.73 ≈ \$7,092; IRR = 19.28%. Project A has the highest IRR, so the answer is \$15,200. IRR Answer: c #7 # . An insurance firm agrees to pay you \$3,310 at the end of 20 years if you pay premiums of \$100 per year at the end of each year for 20 years. Find the internal rate of return to the nearest whole percentage point. a. 9%
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Finance Final Answers - NPV and IRR#9 A firm is analyzing...

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