Question
NPV vs. IRR. Garage, Inc. has identified the following two mutually exclusive project a). What is the IRR for each of these projects? Using the
NPV vs. IRR. Garage, Inc. has identified the following two mutually exclusive project
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?
| Year | Cash Flow (A) | Cash Flow (B) |
|---|---|---|
| 0 | -$29,000 | -$29,000 |
| 1 | 14,400 | 4,300 |
| 2 | 12,300 | 9,800 |
| 3 | 9,200 | 15,200 |
| 4 | 5,100 | 16,800 |
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Fundamentals of Corporate Finance
Authors: Stephen A. Ross, Randolph W. Westerfield, Bradford D.Jordan
8th Edition
978-0073530628, 978-0077861629
