Name:

Excel Assignment #2
9-12 IRR--Mutually Exclusive Projects
Bell Manufacturing is attempting to choose the better of two mutually exclusive projects available for expanding the firm's warehouse capacity. The relevant cash flows for the projects are are shown in the following table. The firm's cost of capital is 15%. Project X $500,000 Project Y $325,000

Initial investment (CF 0 ) Year (t ) 1 2 3 4 5 a. b. c.

Cash inflows (CF t ) $100,000 $140,000 120,000 120,000 150,000 95,000 190,000 70,000 250,000 50,000

Calculate the IRR to the nearest whole percent for each of the projects. See below. Assess the acceptability of each project based on the IRRs found in part a. Which project, on this basis, is preferred?

Answer:
a. Project X
Initial Investment (CF 0)

Project Y <--reference cells above to fill in these cells

1 2 3 4 5 Project X IRR = Project Y IRR = b. Project X is Project Y is Project Pur Y or X here

<--use IRR function <--use IRR function

<--put the word "acceptable" or words "not acceptable". <--put the word "acceptable" or words "not acceptable". is preferred.

c.

not acceptable". not acceptable".