NPV verses IRR Consider the following cash flows on the two mutually exclusive projects for the Bahamas Recreation Corporations (BRC). Both projects require an annual return on 14%

Year Deep Water Fishing New Submarine Ride

0 -$850,000 -$1,650,000

1 320,000 810,000

2 470,000 750,000

3 410,000 690,000

a) If your decision rile is to accept the project with the greater IRR, which project should you choose?

c) To be prudent, you compute the NPV for both projects. Which project should you choose? Is it consistent with the incremental IRR rule?