The Investment Detective

2289 words 10 pages
Project Free Cash Flows (dollars in thousands) Project number: 1 2 3 4 5 6 7 8
Initial investment (2,000) (2,000) (2,000) (2,000) (2,000) (2,000) (2,000) (2,000)
Year
1 $ 330 $ 1,666 $ 160 $ 280 $ 2,200 $ 1,200 $ (350)
2 330 334 200 280 900 (60)
3 330 165 350 280 300 60
4 330 395 280 90 350
5 330 432 280 70 700
6 330 440 280 1,200
7 330 442 280 2,250
…show more content…
Internal Rate of Return:
Rank 1st 2nd 3rd 4th 5th 6th 7th 8th
Project 7 4 8 3 5 1 6 2
Internal Rate of Return 15.25 12.33 11.41 11.33 11.12 10.87 10 6.31

f. Cross Over Rate:
Will be used only on project 7 and 8 since they are the only mutually exclusive projects.
7 8 8-7
(2,000.00) (2,000.00) 0.00
1,200.00 (350.00) (1,550.00)
900.00 (60.00) (960.00)
300.00 60.00 (240.00) IRR=10%
90.00 350.00 260.00
70.00 700.00 630.00
0.00 1,200.00 1,200.00
0.00 2,250.00 2,250.00 NPV NPV
165.04 182.98  Higher NPV

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