Question
Garage Inc has identifed the following two mutually exclusive projects Year Cash Flow A Cash Flow B 0 -43500 -43500 1 21400 6400 2 18500
Garage Inc has identifed the following two mutually exclusive projects
| Year | Cash Flow A | Cash Flow B |
| 0 | -43500 | -43500 |
| 1 | 21400 | 6400 |
| 2 | 18500 | 14700 |
| 3 | 13800 | 22800 |
| 4 | 7600 | 25200 |
A. 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?
B. If the required return is 11 percent, what is the NPV for each of these projects? Which project will the company choose if it applies the NPV decision rule?
C. Over what range of discount rate would the company choose project A? Project B? At what discount rate would the company be indifferent between these two projects? Explain
No Excel please
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Multinational Business Finance
Authors: David K. Eiteman, Arthur I. Stonehill, Michael H. Moffett
13th edition
132743469, 978-0132743464
