What is the IRR for each of these projects? (Do not round intermediate calculati

Question

   

  

What is the IRR for each of these projects? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

  

  

Using the IRR decision rule, which project should the company accept?

If the required return is 12 percent, what is the NPV for each of these projects? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

  

  

At what discount rate would the company be indifferent between these two projects? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

  

Garage, Inc., has identified the following two mutually exclusive projects:

Explanation / Answer

a-1)

a-2) Based on IRR project A should be selcted beacuse IRR A is greater than IRR B

a-3) This decision is not necessarily correct beacuse investing cash flows at higher IRR is difficult to attain, NPv is better indicator than IRR. IRR is a good indicator when cost of capital is given

b-1)

b-2 ) Project B will be chosen as NPV of B is higher than NPV of A

c)

Best of Luck. God Bless

A B Year Cash Flow (A) Cash Flow B 1 0 -29,100 -29,100 2 1 14,500 4,350 3 2 12,400 9,850 4 3 9,250 15,300 5 4 5,150 16,900 IRR 18.79% 17.55% Using Excel Funaction IRR(A1:A6) IRR(B1:B6)

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