What is the IRR for each of these projects? ( Do not round intermediate calculat

Question

What is the IRR for each of these projects? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

Assume the required return is 11 percent. What is the NPV for each of these projects? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).)

Over what range of discount rates would you choose Project A? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

Over what range of discount rates would you choose Project B? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g.,32.16).)

At what discount rate would you be indifferent between these two projects? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

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

Explanation / Answer

Requirement 1

At IRR NPV of Projects becomes Zero. Using MS-Excel IRR Formula

(a)

(b)

Project A with Higher IRR will be selected.

Requirement (2)

Project A

Project B

(a)

(b)

Project B with Higher NPV will be selected.

Requirement (3) (c) Indifferent Point

Calculation of NPV at Various Rate

(a) Project A NPV is always higher at discount above 16.31%.

Hence Discount Rate should be above 16.31%

(b)

Project B NPV is always higher at discount below 16.31%.

Hence Discount Rate should be below 16.31%

Year Project A Project B 0 -65000 -65000 1 34000 19000 2 27000 25000 3 21000 29000 4 17000 34000 IRR using MS Excel 22.23% 21.01%

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