Answer:
IRR For project A= 14.24%
IRR for project B = 14%
No
Explanation:
The internal rate of return is the discount rate that equates the after tax cash flows from an investment to the amount invested.
IRR can be calculated using a financial calculator.
For project A ,
Cash flow in year 0 = ($49,725)
Cash flow in year one = $25,200
Cash flow in year 2 = $18,200
Cash flow in year 3 = 13,800
Cash flow in year 4 = $7,600
IRR = 14.24%
For project B,
Cash flow in year 0 = ($49,725)
Cash flow in year one = $11,200
Cash flow in year 2 = $16,390
Cash flow in year 3 = $16,300
Cash flow in year 4 = $27,500
IRR = 14%
the project with the higher IRR should be chosen. Therefore, project A woold be chosen
To find the IRR using a financial calacutor:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. After inputting all the cash flows, press the IRR button and then press the compute button.
I hope my answer helps you
