Higher Ground Company is presented with the following two mutually exclusive projects. The...
Question:
Higher Ground Company is presented with the following two mutually exclusive projects. The required return for both projects is 15 percent.
| Year | Project M | Project N |
|---|---|---|
| 0 | -$145,000 | -$350,000 |
| 1 | 63,000 | 155,000 |
| 2 | 81,000 | 175,000 |
| 3 | 72,000 | 140,000 |
| 4 | 58,000 | 105,000 |
a. What is the IRR for each project?
b. What is the NPV for each project?
c. Which, if either, of the projects should the company accept?
Net Present Value (NPV):
Net present value (NPV) method is one of the most common technique of capital budgeting. It is considered better than other techniques because it considered time value of money and it considers cashflows of entire life of project.
Answer and Explanation: 1
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View this answerAnswer (a) Internal Rate of Return
Internal rate of return is that discounting rate at which the net present value is equal to zero
For Project M
N...
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