CLST 2090 : Exam1 Part1
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Project 1 & 2 have similar outlays, although the patterns of future cash flows are different. The cash flows as well as the NPV & IRR for the two projects are shown below. For both projects, the required rate of return is 10%.
Year | Project 1 Cash Flow: | Project 2 Cash Flow: |
0 | -50 | -50 |
1 | 20 | 0 |
2 | 20 | 0 |
3 | 20 | 0 |
4 | 20 | 100 |
G) What are the NPVs of Project 1 & 2? 13.4 & 18.3, 18.52 & 21.36, 11.25 & 9.52, or 39.25 & 45.25
H) What are the IRRs of the two projects? 21.86% & 18.92%, 17.35% & 13.36%, 15.36% & 21.86% or 21.88% & 14.62%
I) If the two projects are mutually exclusive, what is the appropriate decision? Project 1, Project 2, Both, or None.
J) If the two projects are independent, what is the appropriate decision? Project 1, Project 2, Both, or None.