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

Question

Mahjong, Inc., has identified the following two mutually exclusive projects: The IRR for Projects A and B is percent and percent respectively. (Do not include the percent signs (%). Round your answers to 2 decimal places, (e.g., 32.16)) If the required return is 11 percent, the NPV for Projects A and B is and , respectively. You will choose Project, if you apply the NPV decision rule. (Do not include the dollar signs ($). Round decimal places, (e.g., 32.16)) At a discount rate of percent, you would be indifferent between these two projects. (Do not include the percent sign (%). Round your answer to 2 decimal places, (e.g. 32.16)

Explanation / Answer

Answer:(a)

The IRR for project A is 20.44% and Project B is 18.84%

Answer:(b)

The NPV for Project A and B is $7507.61 and $9182.30.

Answer:(c) To find the cross over rate, compure the IRR for the difference in cash flows between the two projects:

The crossover rate is 15.30% At discount rate below 15.30%, we should choose B.At discount rate above 15.30% we should choose project A.

Year Cash Flow (A) Cash Flow (B) 0 -43000 -43000 1 23000 7000 2 17900 13800 3 12400 24000 4 9400 26000 IRR 20.44% 18.84%

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