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Q: Finance ( No Answer,   1 Comment )
Question  
Subject: Finance
Category: Business and Money
Asked by: glennis-ga
List Price: $2.00
Posted: 20 Jun 2005 09:40 PDT
Expires: 20 Jul 2005 09:40 PDT
Question ID: 535113
Here are the cash flows for two mutually exclusive projects:				

Project	C0	C1	C2	C3
A	($20,000)	$8,000 	$8,000 	$8,000 
B	($20,000)	0	0	$25,000 

a. At what interest rates would you prefer project A to B?				
0%		
2%				
4%				
6%				
8%				
10%				
12%				
14%				
16%				
18%				
20%
Also, how can I compute using excel?
Answer  
There is no answer at this time.

Comments  
Subject: Re: Finance
From: nh786-ga on 20 Jun 2005 12:18 PDT
 
Using excel's IRR function the 2 rates 
project A = 9.70% and project B = 7.72%
Hence if the discount rate jas to be below these 2 inorder to accept the project

USing ecels's NPV function these are the present values of cash flows
for each of the project. Accept the one with higher NPV for each case
of interest rate

	Proj A	         Proj B
0%	$4,000.00 	$5,000.00 
2.0%	$3,071.07 	$3,558.06 
4.0%	$2,200.73 	$2,224.91 
6.0%	$1,384.10 	$990.48 
8.0%	$616.78 	($154.19)
10.0%	($105.18)	($1,217.13)
12.0%	($785.35)	($2,205.49)

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