Used the discounted payback method-npv and irr methods

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Reference no: EM131599769

Year A B

0 -400,000 -600,000

1 55,000 300,000

2 55,000 300,000

3 55,000 50,000

4 225,000 50,000

5 225,000 50,000

A. Which project would you select if you used the discounted payback method, NPV and IRR methods and explain why? The discount rate is 10%.

B. Following up on A, what is the cross-over rate? Explain the significance of this rate. Draw a graph to show the relationship between NPV and IRR. Include the intercepts and the cross-over rate.

C. Instead of $50,000 in years 3, 4 and 5, what equal payments in years 3, 4 and 5 will make the NPV of project B equal to the NPV of project A

D. Explain some of the weaknesses of the IRR method over the NPV method.

Reference no: EM131599769

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