Reference no: EM132853825
P. Muli has the task of evaluating two mutually exclusive projects with unequal economic lives. Project X has 7 years and Project Y has 4 years of economic use. Their expected cash flows are as follow:-
Project X Y Year Cash Flows (Sh.) Cash Flows (Sh.)
1 2,000,000.00 4,000.000.00
2 2,200,000.00 3,000,000.00
3 2,080,000.00 4800000.00
5 2,760,000.00 -
6 3,200,000.00 -
7 3,600,000.00 -
The company has raised Sh. 8,000,000 through rights issue. The amount raised would be used to finance either of the projects. The cost of equity of the firm is 20%.
Required:
The internal rate of return (IRR) of the projects (rediscount cash flows at 24%)
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