Question
Problem 9-12 NPV versus IRR [LO1, 5] Bruin, Inc., has identified the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0
Problem 9-12 NPV versus IRR [LO1, 5]
Bruin, Inc., has identified the following two mutually exclusive projects: |
Year | Cash Flow (A) | Cash Flow (B) | |||||
0 | $ | 29,900 | $ | 29,900 | |||
1 | 15,300 | 4,750 | |||||
2 | 13,200 | 10,250 | |||||
3 | 9,650 | 16,100 | |||||
4 | 5,550 | 17,700 | |||||
a-1 | What is the IRR for each of these projects? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) |
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 11 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.) |
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 enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
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