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FM11 13 - 11-13 a NPV($ 1,000 900 800 700 600 500 Project A...

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Unformatted text preview: 11-13 a. NPV ($) 1,000 900 800 700 600 500 Project A 400 300 200 Project B Cost of Capital (%) 100 -100 5 10 15 20 25 30 -200 -300 r 0.0% 10.0 12.0 18.1 20.0 24.0 30.0 NPVA $890 283 200 0 (49) (138) (238) NPVB $399 179 146 62 41 0 (51) b. IRRA = 18.1%; IRRB = 24.0%. c. At r = 10%, Project A has the greater NPV, specifically $283.34 as compared to Project B's NPV of $178.60. Thus, Project A would be selected. At r = 17%, Project B has an NPV of $75.95 which is higher than Project A's NPV of $31.05. Thus, choose Project B if r = 17%. Answers and Solutions: 11 - 13 ...
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