Bee Ware Company is presented with the following two mutually exclusive projects

Question

Bee Ware Company is presented with the following two mutually exclusive projects. The required return for both projects is 17.5 percent. Project M: Year 0 is -$191,492 , Year 1 is $68,000 , Year 2 is $94,500 , Year 3 is $76,000 , Year 4 is $72,500 Project N: Year 0 is -$278,559 , Year 1 is $103,000 , Year 2 is $136,500 , Year 3 is $115,000 , Year 4 is $75,000 The IRR for each project is: M: IRR =____________ percent N: IRR =____________ percent The IRR decision rule implies we accept project __________.

Explanation / Answer

Project M: Year 0 is -$191,492 , Year 1 is $68,000 , Year 2 is $94,500 , Year 3 is $76,000 , Year 4 is $72,500

M -$191,492=68000 (1+IRR)+ 94500 (1+IRR)^2+ 76000 (1+IRR)^3+72,500(1+IRR)^4

N: Year 0 is -$278,559 , Year 1 is $103,000 , Year 2 is $136,500 , Year 3 is $115,000 , Year 4 is $75,000

-$278559=103000 (1+IRR)+ 136500(1+IRR)^2+ 115000 (1+IRR)^3+72,000(1+IRR)^4

ACEPT PROJECT M-----------AS IRR GREATER FOR PROJECT M

Related Questions

Navigate

• Browse (All)
• Browse B
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.