Find the internal rate of return

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Reference no: EM133057357

You have a choice between two mutually exclusive investments. 

Year

Project A

Project B

0

-$35

-$10

1

12

4

2

20

4

3

10

4

4

9

4

(a)  Find the internal rate of return (IRR) for both projects and determine which should be accepted if the required rate of return is 25%. Explain why. You need to provide equations.

(b)  Find the crossover rate. You need to provide equations.

(c)  Sketch the NPV profile. You MUST provide at least 5 coordinates to be plotted.

(d)  If the required rate of return is 15%, which project should be chosen if the NPV method is applied? What about if the IRR method is applied? Would the IRR method have a ranking conflict with the NPV method? Support your argument based on the NPV profile in part (c). Do not show any calculations.

(e)  If the required rate of return is 22%, which project should be chosen if the NPV method is applied? What about if the IRR method is applied? Would the IRR method have a ranking conflict with the NPV method? Support your argument based on the NPV profile in part (c). Do not show any calculations.

Reference no: EM133057357

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