RULE 2s3 TO THE NET PRESENT vALUE ALTERNATIVES 285 CHAPTER c. What is the explanation the net present value and for the differences in rankings between d. Which the internal rate of return? method is correct? e. Compute internal of return (IRR) incremental cash flows (project project For for the project is best? For discount rates above discount rates below this IRR, with your answer to question this IRR, which project is best Is this consistent d? 7. The internal rate of return rule and the net present value rule. 12 percent, and the Consider the three projects A, B, and C The cost capital is projects have the of following expected cash flows: Project C Project A Project B -$150,000 -$150,000 -$300,000 End-of-Year 1 110,000 120,000 200,000 End-of-Year 2 90,000 180,000 80,000 a. What is the internal rate of return of the three projects? b. What is the net present value of the three projects? c. If the three projects are which projects should be accepted? d. If the three projects are mutually exclusive, which project should be selected? mited to $450,000, which projects e. If the total budget for the three projects is should be selected? The net present value rule versus the profitability index rule. You must choose between the two projects whose cash flows are shown below. The projects have the same risk. Project B Project A S16,000 $3,200 3,300 10,500 End-of-Year 1 1,260 9,100 End-of-Year 2 3,000 600 End-of-Year 3 a. Compute the net present value and the profitability index (P) for the two projects. Assume a 10 percent discount rate. b. Which of the projects is better according to each of the two methods? c. What is the explanation for the differences in rankings between the NPV and PI methods of Why? d. Which method is correct? The average accounting return. Company is considering the purchase of a s2 million printing Alpha Printer