Can someone check if I did part 1 correct and help explain part 2?
1. Alpha is considering Project A with a cost of capital of 6%
A: -10,000, 3500, 3500, 3500
to calculate the NPV I did -10,000 + 3500/1.06 + 3500/(1.06^2) + 3500/(1.06^3) = -644.46
I used a ti 84 plus to calculate the IRR which I got 2.48
so the NPV < 0 which is the investment would subtract value from the firm and the IRR which is 2.48 is less than the 6% cost of capital.
I should reject Plan A
2. Delta Co. is considering Project D
D: -3,000, 5000, 5000, 5000, -20,000
The IRR I was given was 8.1 and the NPV at 12 percent was 838.
The NPV is > 0 but the IRR is < the cost of capital. I don't think I should accept the project because the cash outflow starts out positive cash flows in years 1-3 with 5000 but in year 4 its -20,000. But the NPV is positive so it would still add value. Is there a way to check this with numbers or can someone explain to me if I should accept this?