Question

Consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation (BRC). Both projects require an annual return of 18 percent.

  

Year	Deepwater Fishing			New Submarine Ride
0	−$	1,030,000		−$	2,010,000
1		450,000			1,060,000
2		574,000			880,000
3		500,000			910,000

  

Compute the NPV for both projects. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

      

c-2.	Based on the NPV, which project should you choose?
	Deepwater Fishing Submarine Ride

  

c-3.	Is the NPV decision consistent with the incremental IRR rule?
	Yes No

Answer 1