Question

# Garage, Inc., has identified the following two mutually exclusive projects:     Year Cash Flow (A) Cash...

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

 Year Cash Flow (A) Cash Flow (B) 0 –\$ 28,000 –\$ 28,000 1 13,400 3,800 2 11,300 9,300 3 8,700 14,200 4 4,600 15,800

 a-1 What is the IRR for each of these projects? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

 IRR Project A % Project B %

a-2

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

 Project A Project B
a-3 Is this decision necessarily correct?
 Yes No
 b-1 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.)

 NPV Project A \$ Project B \$
b-2 Which project will the company choose if it applies the NPV decision rule?
 Project A Project B

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

 Discount rate %

#### Earn Coins

Coins can be redeemed for fabulous gifts.