Consider the following cash flows on two mutually exclusive projects for the Bah
ID: 2732724 • Letter: C
Question
Consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation (BRC). Both projects require an annual return of 17 percent. Year Deepwater Fishing New Submarine Ride
0 $1,015,000 $ 1,980,000
1 435,000 1,030,000
2 562,000 865,000
3 485,000 880,000
Based on the IRR, which project should you choose?
Calculate the incremental IRR for the cash flows. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Based on the incremental IRR, which project should you choose?
Compute the NPV for both projects. (Do not round intermediate calculations. Round your answers to 2 decimal places, e.g., 32.16.)
Based on the NPV, which project should you choose?
a-1. Compute the IRR for both projects. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
Explanation / Answer
A.1.IRR
Deep Water Fishing - 21.132%
Submarine Ride - 19.610%
A.2. Project with greater IRR should be chosed.
Therefore, Deep water Fishing has greater IRR - 21.132%
C.1 Net Present Value
Deep water fishing - $4670000
Submarine ride - $795000
C.2 let us calculate Npv indexes
Deep water fishing - $467000/$1015000 = 0.460
Submarine ride - $795000/$1980000 = 0.401
Based on the indexes project Deep water fishing is better.
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