Question
Garage, Inc., has identified the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 $ 29,200 $ 29,200 1 14,600 4,400
Garage, Inc., has identified the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 $ 29,200 $ 29,200 1 14,600 4,400 2 12,500 9,900 3 9,300 15,400 4 5,200 17,000 a-1 What is the IRR for each of these projects? (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16)) IRR Project A % Project B % a-2 Using the IRR decision rule, which project should the company accept? Project A Project B a-3 Is this decision necessarily correct? Yes No b-1 If the required return is 10 percent, what is the NPV for each of these projects? (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16)) NPV Project A $ Project B $ b-2 Which project will the company choose if it applies the NPV decision rule? Project A Project B c. At what discount rate would the company be indifferent between these two projects? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Discount rate %
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