Problem 9-12 NPV versus IRR [LO1, 5]

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

Year	Cash Flow (A)				Cash Flow (B)
0	$	29,100			$	29,100
1		14,500				4,350
2		12,400				9,850
3		9,250				15,300
4		5,150				16,900

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

%