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Following is information on two alternative investments being considered by Tiger Co. The company requires a 4% return from its investments. Project X1 Project X2 Initial investment $ (80,000 ) $ (120,000 ) Expected net cash flows in: Year 1 25,000 60,000 Year 2 35,500 50,000 Year 3 60,500 40,000 Compute the internal rate of return for each of the projects using Excel functions. Based on internal rate of return, indicate whether each project is acceptable. (Round your answers to 2 decimal places.)

Respuesta :

Answer:

20.34% and 12.99%

Explanation:

The computation of the internal rate of return is shown below:

                             ($)                        ($)

Particulars       Project X 1 Project X 2

Initial Investment -80,000 -1,20,000

Year 1 cash inflow 25,000 60,000

Year 2 cash inflow 35,500 50,000

Year 3 cash inflow 60,500 40,000

Internal rate of return 20.34% 12.99%

Based on the internal rate of return, both the projects are acceptable

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