Romboski, LLC, has identified the following two mutually exclusive projects:
Year Cash Flow (A) Cash Flow (B) 0 â$ 67,000 â$ 67,000 1 43,000 29,300 2 37,000 33,300 3 24,500 39,000 4 15,400 24,300
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 BProject A
Requirement 2: (a) Assume the required return is 13 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 BProject A
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 %
Romboski, LLC, has identified the following two mutually exclusive projects: |
Year | Cash Flow (A) | Cash Flow (B) | ||||||
0 | â$ | 67,000 | â$ | 67,000 | ||||
1 | 43,000 | 29,300 | ||||||
2 | 37,000 | 33,300 | ||||||
3 | 24,500 | 39,000 | ||||||
4 | 15,400 | 24,300 | ||||||
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 BProject A |
Requirement 2: | |
(a) | Assume the required return is 13 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 BProject A |
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 | % |