10. NPV versus IRR Piercy, LLC, has identified the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) -$77,500 -$77,500 1 43,000 21,000 29,000 28,000 3. 23,000 34,000 4 21,000 41,000 What is the IRR for each of these projects? If you apply the IRR decision rule, which project should the company accept? Is this decision necessarily correct? a. If the reguired return is 11 percent, what is the NPV for each of tie
10. NPV versus IRR Piercy, LLC, has identified the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) -$77,500 -$77,500 1 43,000 21,000 29,000 28,000 3. 23,000 34,000 4 21,000 41,000 What is the IRR for each of these projects? If you apply the IRR decision rule, which project should the company accept? Is this decision necessarily correct? a. If the reguired return is 11 percent, what is the NPV for each of tie
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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![10. NPV versus IRR Piercy, LLC, has identified the following two mutually
exclusive projects:
Year
Cash Flow (A)
Cash Flow (B)
-$77,500
-$77,500
1
43,000
21,000
29,000
28,000
3.
23,000
34,000
21,000
41,000
What is the IRR for each
these projects? If you apply the IRR
a.
decision rule, which project should the company accept? Is this decision
necessarily correct?
b. If the required return is 11 percent, what is the NPV for each of the
projects? Which project will you choose if you apply the NPV decision
rule?
Over what range of discount rates would you choose Project A? Project
B? At what discount rate would you be indifferent between these two
projects? Explain.
с.
roiects:](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0506d55b-bb84-43f9-9218-6fc41e3ed9b6%2Ffc8c6c37-c1ab-4980-9800-c5f7dcc008a5%2F33dlwk_processed.jpeg&w=3840&q=75)
Transcribed Image Text:10. NPV versus IRR Piercy, LLC, has identified the following two mutually
exclusive projects:
Year
Cash Flow (A)
Cash Flow (B)
-$77,500
-$77,500
1
43,000
21,000
29,000
28,000
3.
23,000
34,000
21,000
41,000
What is the IRR for each
these projects? If you apply the IRR
a.
decision rule, which project should the company accept? Is this decision
necessarily correct?
b. If the required return is 11 percent, what is the NPV for each of the
projects? Which project will you choose if you apply the NPV decision
rule?
Over what range of discount rates would you choose Project A? Project
B? At what discount rate would you be indifferent between these two
projects? Explain.
с.
roiects:
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