Chapter5 prob 11. this is the answers given on problem c and d

idont understand why the answer is greater than 10.7 and lesser than 13.1

Thus, the Project A should be accepted, if the discount rate is

greater than 10.7% (IRR of incremental investment) and lesser

than 13.1% (IRR of Project A). Kindly explain. Thanks

Now, compute the IRR of incremental investment using the IRR function of spreadsheet. Enter values and formulas in the spreadsheet as shown in the image below. A B D C Cash flows 1 Year 2 Project A Project B Project (B-A) E=(C-B) 3 A B C 40 -100 -100 =C4-B4 51 60 0 -C5-B5 62 60 0 -C6-B6 73 0 140 -C7-B7 8 IRR >>=IRR(B4:B7)|=IRR(C4:C7)=IRR(D4:D7) The obtained result is provided below. A B C D 1 Year Cash flows 2 Project A Project B Project (B - A) 3 A B E=(C-B) 4 0 -100 -100 0 5 1 60 0 -60 6 2 60 0 -60 7 3 0 140 140 8 IRR >> 13.066% 11.869% 10.728% Thus, the Project A should be accepted, if the discount rate is greater than 10.7% (IRR of incremental investment) and lesser than 13.1% (IRR of Project A)