Question

Cooper Electronics uses NPV profiles to visually evaluate competing projects. Key data for the two projects under consideration are given in the following table. Using these data, graph, on the same set of axes, the NPV profiles for each project using discount rates of 0%, 8%, and the IRR.

Terra Firma
Initial investment $30,000 $25,000
Year Operating cash inflows
1 $7,000 $6,000
2 10,000 9,000
3 12,000 9,000
4 10,000 8,000

Solutions

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In this part of the exercise we need to graph the NPV\text{NPV} profiles for projects Terra\text{Terra} and Firma\text{Firma}.

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