17. Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B)0 −$291,000 −$41,6001 37,000 20,0002 55,000 17,6003 55,000 17,2004 366,000 14,000 a) What is the Internal Rate of Return (IRR) for each of these projects? b) Using the IRR decision rule, which project should the company accept? c) If the required return is 11 percent, what is the Net Present Value (NV) for each of these projects? d) Using the NPV decision rule, which project should the company accept? e) Why do you think the NPV and IRR rules do not agree on same project approval/rejection direction?
17. Consider the following two mutually exclusive projects:
Year Cash Flow (A) Cash Flow (B)
0 −$291,000 −$41,600
1 37,000 20,000
2 55,000 17,600
3 55,000 17,200
4 366,000 14,000
a) What is the
b) Using the IRR decision rule, which project should the company accept?
c) If the required return is 11 percent, what is the
d) Using the NPV decision rule, which project should the company accept?
e) Why do you think the NPV and IRR rules do not agree on same project approval/rejection direction?
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