Question
Busy Bee Inc. has identified the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 $43,500 $43,500 1 21,400 6,400 2
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Busy Bee Inc. has identified the following two mutually exclusive projects:
Year | Cash Flow (A) | Cash Flow (B) |
0 | $43,500 | $43,500 |
1 | 21,400 | 6,400 |
2 | 18,500 | 14,700 |
3 | 13,800 | 22,800 |
4 | 7,600 | 25,200 |
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What is the IRR for each of these projects? Using the IRR decision rule, which project should the company accept? Is this decision necessarily correct?
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If the required return is 11%, what is the NPV for each of these projects? Which project will the company choose if it applies the NPV decision rule?
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If the required return is 11%, what is the NPV for each of these projects? Which project will the company choose if it applies the NPV decision rule?
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