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

Question

   

  

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.)

  

Using the IRR decision rule, which project should the company accept?

Project A

Project B

Yes

No

If the required return is 10 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.)

  

Project A

Project B

  

At what discount rate would the company 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.)

  

Bruin, Inc., has identified the following two mutually exclusive projects:

Explanation / Answer

Project A:

IRR = 16.13%

nPV = 3,198.96

Project B:

IRR = 16.02%

NPV = 4600.78

based on IRR choose A, based on NPV choose B

IRR rule is not always correct

Use IRR function in Excel for the cash flow = cash flow B - cash flow A

point of indifference = 15.75%

Discount rate 10.0000% Cash flows Year Discounted CF= cash flows/(1+rate)^year Cumulative cash flow            (28,000.000) 0                           (28,000.00)                       (28,000.00)              13,400.000 1                             12,181.82                       (15,818.18)              11,300.000 2                               9,338.84                       (6,479.339)                8,700.000 3                               6,536.44                                  57.10                4,600.000 4                               3,141.86                            3,198.96

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