Design 1 would require an up-front manufacturing cost of $15,000,000 and will cost $2,500,000 per year for 3 years to swap out the engines in all its current submarines. Design 2 will cost $20,000,000 up front, but due to a higher degree of compatibility will only require $1,500,000 per year to implement. MARR is 10 percent/year. how would you do IRR analysis here? considering negative cashflows !
It is not possible to calculate IRR if you don’t have both positive and negative cashflows. IRR is the rate that makes NPV = 0. Since NPV = PVin - PVout, you will not be able to arrive at a zero if you only have one of PVin and PVout. In essence, there's no rate at which the negative cash flows will be offset by positive cash flows.
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Thanks, Tokhir. You made this happen.
@@joshemmanplease I need your email , I couldn’t find it
Design 1 would require an up-front manufacturing cost of $15,000,000 and will cost $2,500,000 per year for 3 years to swap out the engines in all its current submarines. Design 2 will cost $20,000,000 up front, but due to a higher degree of compatibility will only require $1,500,000 per year to implement. MARR is 10 percent/year. how would you do IRR analysis here? considering negative cashflows !
It is not possible to calculate IRR if you don’t have both positive and negative cashflows. IRR is the rate that makes NPV = 0. Since NPV = PVin - PVout, you will not be able to arrive at a zero if you only have one of PVin and PVout. In essence, there's no rate at which the negative cash flows will be offset by positive cash flows.
Thank you so much @@joshemman
When CF1 of 10,000, can you enter F1 as 2, since there are two 10,000
I guess no, you'll get wrong NPV
if your Cash flow is consecutive, then you can make it as F2, but on the video the second 10.000$ is on the fourth year of a project
Well said!
Could you please tell me how I get your email?