Question

Variables	Project   236	Project   264
Interest   Rate	12.5%	12.5%
MARR	15%	15%
Project   Life   (years)	15	15
Cash   Flows/Year
0	(64,000)	(58,000)
1	12,500	11,589
2	12,500	11,995
3	12,500	12,414
4	12,500	12,849
5	12,500	13,299
6	12,500	13,764
7	12,500	14,246
8	12,500	14,744
9	12,500	15,260
10	12,500	15,795
11	12,500	16,347
12	12,500	16,920
13	12,500	17,512
14	12,500	18,125
15	12,500	18,759

ACB Manufacturing   is   analyzing   investment   decisions.   Two   projects   are   evaluated   using   the   IRR   technique.       The   prevailing interest   rate   is   12.5%.   MARR   is   15%. a. Calculate   the   IRR   for   each   project. b. Calculate   the   NPV   for   each   project. c. Which   project   should   be   selected   if   IRR   is   the   deciding   factor. d. Which   project   should   be   selected   if   NPV   is   the   deciding   factor?

Answer 1

Year	Project 236	Project 264
0	-64000	-58000
1	12500	11589
2	12500	11995
3	12500	12414
4	12500	12849
5	12500	13299
6	12500	13764
7	12500	14246
8	12500	14744
9	12500	15260
10	12500	15795
11	12500	16347
12	12500	16920
13	12500	17512
14	12500	18125
15	12500	18759
NPV	9092.126233	22025.5696
NPV Rule	Accept Project 264
IRR	17.874%	21.728%
IRR Rule	Accept Project 264