Zayas, LLC, has identified the following two mutually exclusive projects: a. Wha

Question

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

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

If you apply the IRR decision rule, which project should the company accept?
  
(Click to select)Project BProject A

b. Assume the required return is 14 percent. What is the NPV for each of these projects? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

  

Which project will you choose if you apply the NPV decision rule?
  
(Click to select)Project AProject B
  
c. Over what range of discount rates would you choose Project A? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
  
Project A            (Click to select)AboveBelow  %

Over what range of discount rates would you choose Project B? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
  
Project B            (Click to select)AboveBelow  %

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

Year Cash Flow (A) Cash Flow (B) 0 $ 68,000 $ 68,000 1 44,000 30,200 2 38,000 34,200 3 25,000 40,000 4 15,600 24,200

Explanation / Answer

Using NPV rule project B shall be chosen

A B 0 -68000 -68,000 1 44,000 30,200 2 38,000 34,200 3 25,000 40,000 4 15,600 24,200 IRR 35.33% 31.88% NPV @ 14% $ 22,760.52 $ 22,924.76

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