132038 1528087 Apps , Homepage Georgia Southern U Management B.BA M Connect?FMAD

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132038 1528087 Apps , Homepage Georgia Southern U Management B.BA M Connect?FMAD Bookshelf Online Lil Question 1 (of 10) velue 10.00 points Hodgkiss Enterprises has gathered projected cash flows for two projects -$257,000 $257,000 89.200 99,700 01,700 108.700 114,300 04,400 88,400 77 400 At what interest rate would the company be indifferent between the two projects? (Do not round intermediate caleun 32.16.) Interest rate Which project is better if the required return is above this interest rate? (Click to select) References eBook & Resources Worksheet nernl ate of etum citenon and pe here to search

Explanation / Answer

Project 1 is favourable  when discount rate is higher than interest rate.

Year Project 1 Project 2 Cash flow
project1 - Cash flow project 2 0 -257000 -257000 0 1 114300 89200 25100 2 104400 99700 4700 3 88400 101700 -13300 4 77,400 108700 -31300 Using IRR function in excel IRR 17.22% The interest rate at which company is indifferent to Project 1 and Project 2 17.22%

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