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# 89 npv 9110 pi 107 project b year cash flow year 0

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Unformatted text preview: usive NPV and PI assume cash flows are NPV reinvested at the required rate of return for reinvested the project. the IRR assumes cash flows are reinvested at IRR the IRR. the The NPV or PI decision may not agree with The the IRR. Solution: select the largest NPV. NPV Time Disparity example Time Project A year cash flow year 0 (48,000) 1 1,200 2 2,400 3 39,000 4 42,000 required return = 12% IRR = 18.10% NPV = \$9,436 NPV \$9,436 PI = 1.20 Time Disparity example Time Project A year cash flow year 0 (48,000) 1 1,200 2 2,400 3 39,000 4 42,000 required return = 12% Project B year cash flow year 0 (46,500) 1 36,500 2 24,000 3 2,400 4 2,400 required return = 12% IRR = 18.10% NPV = \$9,436 PI = 1.20 IRR = 25.51% IRR 25.51% NPV = \$8,455 PI = 1.18 Time Disparity example Time Project A year cash flow year 0 (48,000) 1 1,200 2 2,400 3 39,000 4 42,000 required return = 12% Project B year cash flow year 0 (46,500) 1 36,500 2 24,000 3 2,400 4 2,400 required return = 12% IRR = 18.10% NPV = \$9,436 PI = 1.20 IRR = 25.51% NPV =...
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