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Better Health Inc. is evaluating two capital investments, each of which requires an up-front (time 0) expenditure of $1.5 million. The projects are expected to produce the following net cash inflows:   Year     Project A ($)       Project B ($)   1           500,000               2,000,000   2            1,000,000            1,000,000   3            2,000,000             600,000   a. What is each project’s IRR?   b. What is each project’s NPV if the opportunity cost of capital is 10 percent? 5 percent? 15 percent?

Better Health Inc. is evaluating two capital investments, each of which requires an up-front (time 0) expenditure of $1.5 million. The projects are expected to produce the following net cash inflows:   Year     Project A ($)       Project B ($)   1           500,000               2,000,000   2            1,000,000            1,000,000   3            2,000,000             600,000   a. What is each project’s IRR?   b. What is each project’s NPV if the opportunity cost of capital is 10 percent? 5 percent? 15 percent?

Intermediate Financial Management (MindTap Course List)
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter12: Capital Budgeting: Decision Criteria
Section: Chapter Questions
Problem 7P: Your division is considering two investment projects, each of which requires an up-front expenditure...
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Better Health Inc. is evaluating two capital investments, each of which requires an up-front (time 0) expenditure of $1.5 million. The projects are expected to produce the following net cash inflows:

 

Year     Project A ($)       Project B ($)

 

1           500,000               2,000,000

 

2            1,000,000            1,000,000

 

3            2,000,000             600,000

 

a. What is each project’s IRR?

 

b. What is each project’s NPV if the opportunity cost of capital is 10 percent? 5 percent? 15 percent?

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