00:01
First, we can calculate the net present value for both of our projects.
00:04
This is going to be the sum of our present values of all of our cash flows.
00:11
So, for our project m, we're going to get that our mpv is $3 ,397.
00:20
And for project y, we're going to get that the mpv is $15 ,132.
00:29
Now we need to calculate our internal rate of return.
00:32
This is the discount rate that makes the mpv from a project equal to zero.
00:40
For project m, setting our equation to zero and solving for our discount rate is going to be a complex process.
00:47
However, we know that our irr must be greater than the discount rate of 10 % because our mpv is positive when our discount rate is 10.
00:56
Similarly, for project y, the rra must be greater than the discount rate because mpv is positive.
01:02
So this is for projects m and y...