Romboski, LLC, has identified the following two mutually exclusive projects:
Year Cash Flow (A) Cash Flow (B) 0 â$ 65,000 â$ 65,000 1 41,000 27,500 2 35,000 31,500 3 23,500 37,000 4 15,000 24,500
Requirement 1: (a) What is the IRR for each of these projects? (Do not round intermediate calculations. Enter your answer as a percentage roundedto 2 decimal places (e.g., 32.16).)
Internal rate of return Project A % Project B %
(b) If you apply the IRR decision rule, which project should the company accept?
Requirement 2: (a) Assume the required return is 11 percent. What is the NPV for each of these projects? (Do not round intermediate calculations.Round your answers to 2 decimal places (e.g., 32.16).)
Net present value Project A $ Project B $
(b) Which project will you choose if you apply the NPV decision rule?
Requirement 3: (a) Over what range of discount rates would you choose Project A? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
Project A
@ %
(b) Over what range of discount rates would you choose Project B? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
Project B
@ %
(c) At what discount rate would you be indifferent between these two projects? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)
Discount rate %
Romboski, LLC, has identified the following two mutually exclusive projects:
| Year | Cash Flow (A) | Cash Flow (B) | ||||||
| 0 | â$ | 65,000 | â$ | 65,000 | ||||
| 1 | 41,000 | 27,500 | ||||||
| 2 | 35,000 | 31,500 | ||||||
| 3 | 23,500 | 37,000 | ||||||
| 4 | 15,000 | 24,500 | ||||||
| Requirement 1: | |
| (a) | What is the IRR for each of these projects? (Do not round intermediate calculations. Enter your answer as a percentage roundedto 2 decimal places (e.g., 32.16).) |
| Internal rate of return | |
| Project A | % |
| Project B | % |
| (b) | If you apply the IRR decision rule, which project should the company accept? |
| Requirement 2: | |
| (a) | Assume the required return is 11 percent. What is the NPV for each of these projects? (Do not round intermediate calculations.Round your answers to 2 decimal places (e.g., 32.16).) |
| Net present value | |
| Project A | $ |
| Project B | $ |
| (b) | Which project will you choose if you apply the NPV decision rule? |
| Requirement 3: | |
| (a) | Over what range of discount rates would you choose Project A? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) |
| Project A |
| @ % |
| (b) | Over what range of discount rates would you choose Project B? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) |
| Project B |
| @ % |
| (c) | At what discount rate would you be indifferent between these two projects? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) |
| Discount rate | % |
Related questions
| Romboski, LLC, has identified the following two mutually exclusive projects: |
| Year | Cash Flow (A) | Cash Flow (B) | ||||||
| 0 | ?$ | 52,000 | ?$ | 52,000 | ||||
| 1 | 28,000 | 15,800 | ||||||
| 2 | 22,000 | 19,800 | ||||||
| 3 | 17,000 | 24,000 | ||||||
| 4 | 12,400 | 25,800 | ||||||
| Requirement 1: | |
| (a) | What is the IRR for each of these projects? (Do not round intermediate calculations. Enter your answer as a percentage roundedto 2 decimal places (e.g., 32.16).) |
| Internal rate of return | |
| Project A | % |
| Project B | % |
| (b) | If you apply the IRR decision rule, which project should the company accept? |
| (Click to select)Project AProject B |
| Requirement 2: | |
| (a) | Assume the required return is 11 percent. What is the NPV for each of these projects? (Do not round intermediate calculations.Round your answers to 2 decimal places (e.g., 32.16).) |
| Net present value | |
| Project A | $ |
| Project B | $ |
| (b) | Which project will you choose if you apply the NPV decision rule? |
| (Click to select)Project AProject B |
| Requirement 3: | |
| (a) | Over what range of discount rates would you choose Project A? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) |
| Project A | (Click to select)BelowAbove | @ % | |
| (b) | Over what range of discount rates would you choose Project B? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) |
| Project B | (Click to select)BelowAbove | @ % | |
| (c) | At what discount rate would you be indifferent between these two projects? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) |
| Discount rate | % |
| Garage, Inc., has identified the following two mutually exclusive projects: |
| Year | Cash Flow (A) | Cash Flow (B) | |||||
| 0 | â$ | 29,100 | â$ | 29,100 | |||
| 1 | 14,500 | 4,350 | |||||
| 2 | 12,400 | 9,850 | |||||
| 3 | 9,250 | 15,300 | |||||
| 4 | 5,150 | 16,900 | |||||
| a-1 | What is the IRR for each of these projects? (Do not round intermediate calculations and round your final answers 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? | ||||
|
| a-3 | Is this decision necessarily correct? | ||||
|
| b-1 | If the required return is 12 percent, what is the NPV for each of these projects? (Do not round intermediate calculations and round your final 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? | ||||
|
| c. | At what discount rate would the company be indifferent between these two projects? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) |
| Discount rate | % |
