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Unformatted text preview: stock cost today? ANS: Q4. Consider two mutually exclusive new projects. Assume the discount rate is 15%. Project A takes an initial investment of 100000 at time 0. It will generate cash flow of 40000 per year in the next five years. The cash flow will be terminated at year 6. Project B takes initial investment of 30000 at time 0. The cash flow at year 1 is 20000. In each subsequent year, the cash flow will grow at 15% per year. The cash flow will be terminated at year 6. The investments and cash flows are shown in the following table. Year Porject A Project B 0 100000 30000 1 40000 20000 2 40000 23000 3 40000 26450 4 40000 30418 5 40000 34980 Compute their NPV, IRR, Incremental IRR, PI. ANS:...
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 Winter '09
 KING

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