Problem 9-12 NPV versus IRR (LO1, 5)

Parkallen Inc. has identified the following two mutually exclusive projects:

Year	Cash Flow (A)		Cash Flow (B)
0	$	-37,400			$	-37,400
1		17,510				7,500
2		15,660				13,000
3		12,560				18,400
4		8,460				20,640

a-1. What is the IRR for each of these projects? (Do not round intermediate calculations. Round the final answers to 2 decimal places.)

	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 11%, what is the NPV for each of these projects? (Do not round intermediate calculations. Round the final answers to 2 decimal places. Omit $ sign in your response.)

	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. Round the final answer to 2 decimal places.)

Discount rate % ____