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Garage, Inc., has identified the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 $ 30,000 $ 30,000 1 15,400 4,800

Garage, Inc., has identified the following two mutually exclusive projects:

Year Cash Flow (A) Cash Flow (B)
0 $ 30,000 $ 30,000
1 15,400 4,800
2 13,300 10,300
3 9,700 16,200
4 5,600 17,800

a-1

What is the IRR for each of these projects? (Do not round intermediate calculations. Enter your answers as a percent rounded 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 12 percent, what is the NPV for each of these projects? (Do not round intermediate calculations and round your 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. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Discount rate %

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