a) Compute the IRR for each investment. The rate of return for Project A is % Th

Question

a) Compute the IRR for each investment.

The rate of return for Project A is %

The rate of return for Project B is %

?(b) At MAR=10?%, determine the acceptability of each project.

Would you accept Project A?? yes or no

Would you accept Project? B? yes or no

?(c) If A and B are mutually exclusive? projects, which project would you select based on the rate of return on incremental investment at MAR=10?%?

The rate of return on the incremental investment is %

Which project would you select based on the rate of return on incremental investment at MARR=10?%?

Explanation / Answer

IRR of Project A = 20.12%, IRR of Project B = 25.19%

b)

NPV of Project A and project B are positive hence both the projects must be selected.

c)IF A & B are mutually exclusive events project B must be selected as it has higher NPV.

Rate of return on incremental cash flows = -182.95%

Based on incremental investment at MARR 10% both projects can be selected.

Best of Luck. God Bless

A B Net Cash flow n Project A Project B 1 0 -115000 -95000 2 1 30000 20000 3 2 30000 20000 4 3 120000 130000 IRR 20.12% 25.19% Using excel formula IRR(A1:A4) IRR(B1:B4)

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