d. Calculate the NPV of the incremental investment (B- A) fordiscount rates of 0, 10, and 20%. Plot these on your graph.

Post by **answerhappygod** » Thu Apr 28, 2022 1:38 pm

d. Calculate the NPV of the incremental investment (B- A) fordiscount rates of 0, 10, and 20%. Plot these on your graph.Show that the circumstances in which you would accept A arealso those in which the IRR on the incremental investment isless than the opportunity cost of capital.
d. Calculate the NPV of the incremental investment (B- A) for
discount rates of 0, 10, and 20%. Plot these on your graph.
Show that the circumstances in which you would accept A are
also those in which the IRR on the incremental investment is
less than the opportunity cost of capital.
My question:How to plot the result on the graph?

: D Calculate The Npv Of The Incremental Investment B A Fordiscount Rates Of 0 10 And 20 Plot These On Your Graph 1 (46.84 KiB) Viewed 22 times

: D Calculate The Npv Of The Incremental Investment B A Fordiscount Rates Of 0 10 And 20 Plot These On Your Graph 2 (47.22 KiB) Viewed 22 times

: D Calculate The Npv Of The Incremental Investment B A Fordiscount Rates Of 0 10 And 20 Plot These On Your Graph 3 (47.07 KiB) Viewed 22 times

Step 9 of 12 A d. Calculate incremental investment (B-A): The incremental investment is the difference between the net present value of the Project A and the net present value of the Project B calculated as below: Compute the NPV of incremental investment at 0% discount rate as follows: A Year B Present value factor @ 0% А 0 1 2 3 4 5 6 7 8 Com B 1.000000 1.000000 1.000000 1.000000 с D E F Incremental Present value of Cash flows investment cash flows Project A Project B Project (B- A) Project (B - A) с D E=(D-C) F =( BE) -100 -100 0 0.0000 0 -60 -60.0000 60 0 -60 -60.0000 0 140 140 140.0000 Net Present Value = SUM >> 20.000 60 2 3 Thus, the NPV is $20.00 Comment
Step 12 of 12 A Now, compute the IRR of incremental investment using the IRR function of spreadsheet. Enter values and formulas in the spreadsheet as shown in the image below. A B D 1 Year Cash flows 2 Project A Project B Project (B - A) 3 A B с E-(C-B) 40 -100 -100 -C4-B4 51 60 0 -C5-B5 62 60 0 -C6-B6 73 0 140 -C7-B7 8 IRR >> FIRR(B4:B7) FIRR(C4:07) FIRR(D4:D7) 4 0 The obtained result is provided below. А B D 1 Year Cash flows 2 Project A Project B Project (B - A) 3 A B с E=(C-B) 0 -100 -100 5 1 60 0 -60 2 60 0 -60 7 3 0 140 140 8 IRR >> 13.066% 11.869% 10.728% Thus, the Project A should be accepted, if the discount rate is greater than 10.7% (IRR of incremental investment) and lesser than 13.1% (IRR of Project A). 6 Comment
Step 12 of 12 Now, compute the IRR of incremental investment using the IRR function of spreadsheet. Enter values and formulas in the spreadsheet as shown in the image below. A B D 1 Year Cash flows 2 Project A Project B Project (B - A) 3 A B с E-(C-B) 40 -100 -100 -C4-B4 51 60 0 -C5-B5 62 60 0 -C6-B6 73 0 140 -C7-B7 8 IRR >> FIRR(B4:B7) -IRR(C4:07) FIRR(D4:D) 4 0 The obtained result is provided below. А B D 1 Year Cash flows 2 Project A Project B Project (B - A) 3 A B с E=(C-B) 0 -100 -100 5 1 60 0 -60 2 60 0 -60 7 3 140 140 8 IRR >> 13.066% 11.869% 10.728% Thus, the Project A should be accepted, if the discount rate is greater than 10.7% (IRR of incremental investment) and lesser than 13.1% (IRR of Project A). 6 Comment