11. NPV versus IRR - consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation (BRC). Both projects requires an annual return of 14 percent. New Submarine Ride year Deepwater Fishing 01 -$750000 -$2100000 1 310000 1200000 2. 430000 760000 330000 850000 As financial analyst for BRC, you are asked the following questions: a. If your decision rule is to accept the project with the greater IRR, which project should you choose? b. Because you are fully aware of the IRR rule's scale problem, you calculate the incremental IRR for the cash flows. Based on your computation, which project should you choose? C. To be prudent, you compute the NPV for both projects. Which project should you choose? Is it consistent with the incremental IRR rule?

11. NPV versus IRR - consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation (BRC). Both projects requires an annual return of 14 percent. New Submarine Ride year Deepwater Fishing 01 -$750000 -$2100000 1 310000 1200000 2. 430000 760000 330000 850000 As financial analyst for BRC, you are asked the following questions: a. If your decision rule is to accept the project with the greater IRR, which project should you choose? b. Because you are fully aware of the IRR rule's scale problem, you calculate the incremental IRR for the cash flows. Based on your computation, which project should you choose? C. To be prudent, you compute the NPV for both projects. Which project should you choose? Is it consistent with the incremental IRR rule?

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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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

NOV
NPV versus IRR
18
11. NPV versus IRR - consider the following cash flows on two mutually exclusive projects for the Bahamas
Recreation Corporation (BRC). Both projects requires an annual return of 14 percent.
New Submarine
year
Deepwater Fishing
Ride
-$750000
-$2100000
310000
1200000
430000
760000
3.
330000
850000
As financial analyst for BRC, you are asked the following questions:
a. If your decision rule is to accept the project with the greater IRR, which project should you choose?
b. Because you are fully aware of the IRR rule's scale problem, you calculate the incremental IRR for the cash flows.
Based on your computation, which project should you choose?
C. To be prudent, you compute the NPV for both projects. Which project should you choose? Is it consistent with the
incremental IRR rule?

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Consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation (BRC). Both projects require an annual return of 17 percent. Year Deepwater Fishing New Submarine Ride 0 −$ 1,000,000 −$ 1,950,000 1 420,000 1,000,000 2 550,000 850,000 3 470,000 850,000 a-1. Compute the IRR for both projects. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) a-2. Based on the IRR, which project should you choose? multiple choice 1 Deepwater Fishing Submarine Ride b-1. Calculate the incremental IRR for the cash flows. (Do not round intermediate calculations and enter your…
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Vijay
Consider cash flows for the following investment projects (MARR = 15 %). Suppose that projects are mutually exclusive. Which project would you select based on AE criterion? Project A -3000 Project B -3500 ProjectC 4000 1400 1100 1500 2. 1650 1000 1500 3. 1300 1000 1800 1800 4 750 1000
Please give exact answer and excel steps Jeans LLC has a project with the following cash flows . Its required rate of return is 5 % , Year 012345 Cash Flow Project A -52,000.00 25,000.00 17,000.00 14,000.00 12,000.00 -3,000.00 What is the internal rate of retum ( IRR ) for this project ? options: a. 11.73859230479%b. 11.73962884992%c. 11.738592037872%d. 11.738591574995%e. 11.738592402818%f. 11.738672984783% Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.

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