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Consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation (BRC). Both projects require an annual return of 17 percent.

Consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation (BRC). Both projects require an annual return of 17 percent.

Year Deepwater Fishing New Submarine Ride
0 $ 1,005,000 $ 1,960,000
1 425,000 1,010,000
2 554,000 855,000
3 475,000 860,000

a-1.

Compute the IRR for both projects. (Do not round intermediate calculations. Round your answers to 2 decimal places. (e.g., 32.16))

IRR
Deepwater Fishing %
Submarine Ride %

a-2.

Based on the IRR, which project should you choose?

Submarine Ride
Deepwater Fishing

b-1.

Calculate the incremental IRR for the cash flows. (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16))

Incremental IRR %

b-2.

Based on the incremental IRR, which project should you choose?

Deepwater Fishing
Submarine Ride

c-1.

Compute the NPV for both projects.(Do not round intermediate calculations. Round your answers to 2 decimal places. (e.g., 32.16))

NPV
Deepwater Fishing $
Submarine Ride $

c-2.

Based on the NPV, which project should you choose?

Deepwater Fishing
Submarine Ride

c-3.

Is it consistent with the incremental IRR rule?

No
Yes

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