Answer: The internal rate of return for project A is $26,074.38
Explanation:
Using the formula
R1/(1+K)^1 R2/(1+K)^2+ - - - Rn/(1+K)^n -
C =0
Where C = capital outlay, K=Rate of interest, R=Net cash flow
Given that K=10%, (10/100)=0.1 R1=$65,000, R2=$75,000 C =$95,000
Project A
65,000/(1+0.1)^1 + 75,000/(1+0.1)^2 - 95,000
65,000/(1.1)^1 +75,000/(1.1)^2 - 95,000
59090.91 + 61983.47 - 95,000
121074.38 - 95000
= $26,074.38
Project B
R1=$64,000, R2=$67,000,R3=$56,000, R4=$45,000 C =$120,000
64,000/(1+0.1)^1+ 67,000/(1+0.1)^2+ 56,000/(1+0.1)^3 + 45,000/(1+0.1)^4 - 120,000
64,000/(1.1)^1 + 67,000/(1.1)^2 + 56,000/(1.1)^3 + 45,000/(1.1)^4 - 120,000
58181.82 + 55371.90 + 42073.63 + 30735.61 - 120,000
= 186362.96 - 120,000
= $66,362.96
