- CFA Exams
- CFA Level I Exam
- Study Session 10. Corporate Finance (1)
- Reading 32. Capital Budgeting
- Subject 5. Comparison of the NPV and IRR Methods

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**CFA Practice Question**

Beaumont Bearings is analyzing two mutually exclusive projects with the following cash flows. Its cost of capital is 9%.

The IRRs for the two projects are:

A. X: 34.55%; Y: 27.87%

B. X: 10.5%; Y: 12.9%

C. X: 46.45%; Y: 54.85%

**Explanation:**By setting the NPV equal to zero and solving for the discount rate with the help of a financial calculator:

IRR

_{X}= 46.45%, IRR

_{Y}= 54.85%

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**User Contributed Comments**
5

User |
Comment |
---|---|

myanmar |
is this irr too high for the TI BAII Plus i only get an "error 7" with this but "normal" irr's with other smaller cash flows in the years 1 to 3? |

gizi |
You did something wrong myanmar. The BA II Plus provides the coorect answer. |

swallow2585 |
can someone show the calc key in for BAII? |

clipp |
make sure to put in the negative outflow for C0. Then after inputting cash flows select "IRR" then "CPT" and you get your answer. |

deleseleuc |
CFo 10,000 (+-) ENTER Down Arrow CF01 8,000 ENTER Down Down CF02 7,000 ENTER Down Down CF03 4,000 ENTER IRR > CPT |