Quantitative Problem:Bellinger Industries is considering two projects for inclusion in its capital budget, and you have been asked to do the analysis. Both projects' after-tax cash flows are shown on the time line below. Depreciation, salvage values, net operating working capital requirements, and tax effects are all included in these cash flows. Both projects have 4-year lives, and they have risk characteristics similar to the firm's average project. Bellinger's WACC is 10%.

0 1 2 3 4

Project : A-1,100 600 380 270 340

Project : B-1,100 200 315 420 790

What is Project A's IRR? Do not round intermediate calculations. Round your answer to two decimal places.

%

What is Project B's IRR? Do not round intermediate calculations. Round your answer to two decimal places.

%

If the projects were independent, which project(s) would be accepted according to the IRR method?

If the projects were mutually exclusive, which project(s) would be accepted according to the IRR method?

Could there be a conflict with project acceptance between the NPV and IRR approaches when projects are mutually exclusive?

The reason is

Reinvestment at the

is the superior assumption, so when mutually exclusive projects are evaluated theapproach should be used for the capital budgeting decision.