Romboski, LLC, has identified the following two mutually exclusive projects:

Year Cash Flow (A)

Cash Flow (B)

Yr0 $ 61,000 $ 61,000

Yr1 37,000 23,900

Yr2 31,000 27,900

Yr3 21,500 33,000

Yr4 14,200 24,900

Requirement 1:

(a) What is the IRR for each of these projects?

Internal rate of return Project A %

Project B %

(b) If you apply the IRR decision rule, which project should the company accept?

Requirement 2:

(a) Assume the required return is 12 percent. What is the NPV for each of these projects?

Net present value

Project A $ Project

B $

(b) Which project will you choose if you apply the NPV decision rule?

Requirement 3:

(a) Over what range of discount rates would you choose

Project A?

Project A @ %

(b) Over what range of discount rates would you choose

Project B?

Project B @ %

(c) At what discount rate would you be indifferent between these two projects?

Discount rate %