Question
Bruin, Inc., has identified the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 $ 28,400 $ 28,400 1 13,800 4,000
Bruin, Inc., has identified the following two mutually exclusive projects: |
Year | Cash Flow (A) | Cash Flow (B) | |||||
0 | $ | 28,400 | $ | 28,400 | |||
1 | 13,800 | 4,000 | |||||
2 | 11,700 | 9,500 | |||||
3 | 8,900 | 14,600 | |||||
4 | 4,800 | 16,200 | |||||
a-1 | What is the IRR for each of these projects? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) |
a-2 | Using the IRR decision rule, which project should the company accept? |
multiple choice 1
|
a-3 | Is this decision necessarily correct? |
multiple choice 2
|
b-1 | 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.) |
b-2 | Which project will the company choose if it applies the NPV decision rule? |
multiple choice 3
|
c. | At what discount rate would the company be indifferent between these two projects? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
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