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1) Garage, Inc., has identified the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 $ 29,500 $ 29,500 1 14,900

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

Year Cash Flow (A) Cash Flow (B)
0 $ 29,500 $ 29,500
1 14,900 4,550
2 12,800 10,050
3 9,450 15,700
4 5,350 17,300

a-1

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

IRR
Project A %
Project B %

a-2

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

Project A
Project B

a-3 Is this decision necessarily correct?
Yes
No

b-1

If the required return is 10 percent, what is the NPV for each of these projects? (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))

NPV
Project A $
Project B $

b-2 Which project will the company choose if it applies the NPV decision rule?
Project A
Project B

c.

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

Discount rate %

2) What is the IRR of the following set of cash flows? (Round your answer to 2 decimal places. (e.g., 32.16))

Year Cash Flow
0 $ 16,900
1 7,600
2 8,900
3 7,400

IRR

%

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