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johnpaech johnpaech
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7 years ago
Assuming that the discount rate for project A is 16% and the discount rate for B is 15%, then given that these are mutually exclusive projects, which project would you take and why?
Textbook 
Corporate Finance: The Core

Corporate Finance: The Core


Edition: 4th
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#1
7 years ago
NPV A
CF0 = -41,215
CF1 = 12,500
CF2 = 14,000
CF3 = 16,500
CF4 = 18,000
CF5 = 20,000
I = 16
Compute NPV = $9,999.50

NPV B
CF0 = -46,775
CF1 = 15,000
CF2 = 15,000
CF3 = 15,000
CF4 = 15,000
CF5 = 15,000
CF6 = 15,000
Compute NPV = $9,992.24

Take A, since NPV of A > NPV of B and NPV of A is positive.
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