c) Calculate the Net Present Value (NPV) for project Bart and project Lisa and recommend which project the company should invest in (if any), giving your reasons. The cost of capital is 10%. d) You are told that at a cost of capital of 28%, the NPV of Project Bart is -£34,109 and the NPV of Project Lisa is -£5,204. Use this information (and the answers to part (c)) to estimate the Internal Rate of Return (IRR) for both projects and explain how Simpson Ltd should interpret these findings.

c) Calculate the Net Present Value (NPV) for project Bart and project Lisa and recommend which project the company should invest in (if any), giving your reasons. The cost of capital is 10%. d) You are told that at a cost of capital of 28%, the NPV of Project Bart is -£34,109 and the NPV of Project Lisa is -£5,204. Use this information (and the answers to part (c)) to estimate the Internal Rate of Return (IRR) for both projects and explain how Simpson Ltd should interpret these findings.

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter5: Investment Decisions: Look Ahead And Reason Back

Section: Chapter Questions

Problem 5.4IP

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