Solve the entire problem setThe Basics of Capital Budgeting: Evaluating Cash Flows: IRR

A project's internal rate of return $($IRR$)$ is the

that forces the PV of the expected future cash flows to equal the initial cash flow. The IRR is an estimate of the project's rate of return, and it is comparable to the $($

on a bond. The equation for calculating the IRR is:

$NPV=C{F}_0+\frac{C{P}_1}{(1+\text{I}\text{R}\text{R}{)}^1}+\frac{C{P}_2}{(1+\text{I}\text{R}\text{R}{)}^2}+$dots$+\frac{C{F}_N}{(1+\text{I}\text{R}\text{R}{)}^N}={\displaystyle \underset{t=0}{\overset{N}{}}}\frac{C{P}_t}{(1+\text{I}\text{R}\text{R}{)}^t}$

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 $10\%.$

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

$\%$

What is Project B$\text{'}$s IRR? Do not round internediate calculations. Round your answer to two decimal places.

$\%$

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

would be accepted.

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

would be accepted.

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

The reason is the NPV and IRR approaches use $-$Select$-$

when mutually exclusive projects are considered.