Question 3IRR = a% + NPVa (b%-a%)NPVa- NPVbAnglo Ltd has a cost of capital of 12% and it has appraised two projects.Project A has a positive NPV of €5,000 when discounted at 12%and a positive NPV of €3,600 when discounted at 16%.Project B has a positive NPV of €8,000 when discounted at 12%and a negative NPV of €1,000 when discounted at 16%.The projects are mutually exclusive.Required:What is the IRR of Project A and B?• Project A has an IRR of 26.3% and B an IRR of 16.5%• Project A has an IRR of 26.3% and B an IRR of 15.6%• Project A has an IRR of 14.3% and B an IRR of 16.5%• Project A has an IRR of 14.3% and B an IRR of 15.6%Which of the following statements is correct?• Both NPV and IRR indicate that Project A is the more financially viable project.• In order to maximise shareholder wealth Project A is the better project.• Neither Project A or Project B should be accepted from a financial perspective.• Project B will increase shareholder wealth more than Project A at the current cost of capital.

An investor is considering three projects, A, B and C summarized in the table below.  Investment cost Annual operating profit Project life (years)Project A -70000 17000 5Project B -90000 15000 8Project C -60000 13000 6Suppose the investor can borrow funds at an interest rate of 6%, by using the NPV rule with a 5% discount rate, he should choose project _____. When using the IRR rule, he should ____ this project.

There are two projects: project A and project B. Each of the project has the cost of Rs 100,000 and cost of capital for each project is 12 percent. The project's expected net cash flows are as follows: Year Project A Project B 0 Rs (100,000) Rs (100,000) 1 65,000 35,000 2 30,000 30,000 3 30,000 30,000 4 10,000 10,000 a. Calculate NPV for each project. Which project or projects should be accepted if they are independent? b. Calculate IRR for each project. Which project should be accepted if they are mutually exclusive?

If projects are mutually exclusive, then the NPV and the IRR may disagree on which project adds value to the shareholder's wealth.Select one:TrueFalse

If the Net Present Value of a project equals to zero then:Select one:a. There is no way to estimate the IRRb. The IRR is less than the cost of capitalc. The IRR is equal to the cost of capitald. The IRR is larger than the cost of capital

Your division is considering two projects with the following net cash flows0 1 2 3Project A -$25 $5 $10 $17Project B -$20 $10 $9 $6a.What are the projects’ NPVs assuming the WACC is 5%? 10%? 15?b.What are the projects’ IRR at each of these WACCs?c.If the WACC was 5% and A and B were mutually exclusive, which project would you choose? What if the WACC was 10% and 15%? (Hint: The crossover rate is 7.81%)