Consider the following cash flows on two mutually exclusive projects for the B.C. Recreation Corporation (BCRC). Both projects require an annual return of 12 percent.

Year	Deepwater Fishing	New Submarine Ride
0	$870,000	$3,650,000
1	570,000	2,850,000
2	690,000	1,380,000
3	590,000	1,470,000

As a financial analyst for BCRC, you are asked to answer the following questions:

a-1. Calculate the IRR for both projects. (Do not round intermediate calculations. Round the answer to 2 decimal places.)

	IRR
Deepwater Fishing	%
New Submarine Ride	%

a-2. If your decision rule is to accept the project with the greater IRR, which project should you choose?

multiple choice 1

• Deepwater Fishing

• New Submarine Ride

b-1. Calculate the incremental IRR for the projects. (Do not round intermediate calculations. Round the answer to 2 decimal places.)

Incremental IRR %

b-2. Because you are fully aware of the IRR rules scale problem, you calculate the incremental IRR for the cash flows. Based on your computation, which project should you choose?

multiple choice 2

• Deepwater Fishing

• New Submarine Ride

c-1. Compute the NPV for both projects. (Do not round intermediate calculations. Round the answers to 2 decimal places.)

	NPV
Deepwater Fishing	$
New Submarine Ride	$

c-2. Which project should you choose?

multiple choice 3

• Deepwater Fishing

• New Submarine Ride

c-3. Is it consistent with the incremental IRR rule?

multiple choice 4

• Yes, always consistent

• No, always inconsistent