Question

Projects A and B are mutually exclusive. Project A has cash flows of −$10,000, $5,100, $3,400, and $4,500 for Years 0 to 3, respectively. Project B has cash flows of −$10,000, $4,500, $3,400, and $5,100 for Years 0 to 3, respectively.

         B-1 what is the IRR of project A?

         B-2 What is the IRR of project B?

         B-3 Based on the IRR rule, which project should be accepted and why?

         B-4 At what required rate of return will you be indifferent between the two projects?

B-5 If you have a required rate of return of 10%, which project (if any) should you accept and why?

B-6 In order for project B to be accepted (A rejected), what should be the required rate of return?

Answer 1