4. NPV versus IRR Bruin, Inc., has identified the following two mutually exclusive projects: Year 0 1 2 3 4 Cash Flow(A) -$ 40,000 19,100 17,800 15,200 8,400 Cash Flow(B) -$ 40,000 6,300 14,200 17,900 30,300 a. What is the IRR for each of these projects? (5%) Using the IRR decision rule, which project should the company accept? (5%) b. If the required return is 10 percent, what is the NPV for each of these projects? (5%) Which project will the company choose if it applies the NPV decision rule? (5%)
4. NPV versus IRR Bruin, Inc., has identified the following two mutually exclusive projects: Year 0 1 2 3 4 Cash Flow(A) -$ 40,000 19,100 17,800 15,200 8,400 Cash Flow(B) -$ 40,000 6,300 14,200 17,900 30,300 a. What is the IRR for each of these projects? (5%) Using the IRR decision rule, which project should the company accept? (5%) b. If the required return is 10 percent, what is the NPV for each of these projects? (5%) Which project will the company choose if it applies the NPV decision rule? (5%)
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
Related questions
Question
![4. NPV versus IRR
Bruin, Inc., has identified the following two mutually exclusive projects:
Year
0
1
2
3
4
Cash Flow(A)
-$ 40,000
19,100
17,800
15,200
8,400
Cash Flow(B)
-$ 40,000
6,300
14,200
17,900
30,300
a. What is the IRR for each of these projects? (5%) Using the IRR decision rule,
which project should the company accept? (5%)
b. If the required return is 10 percent, what is the NPV for each of these projects?
(5%) Which project will the company choose if it applies the NPV decision rule?
(5%)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0ac0e534-5e53-4590-8268-4207cfb163d3%2Fa2efbbf5-7c6d-4520-a94c-6fde2307b815%2Ftviazyr_processed.jpeg&w=3840&q=75)
Transcribed Image Text:4. NPV versus IRR
Bruin, Inc., has identified the following two mutually exclusive projects:
Year
0
1
2
3
4
Cash Flow(A)
-$ 40,000
19,100
17,800
15,200
8,400
Cash Flow(B)
-$ 40,000
6,300
14,200
17,900
30,300
a. What is the IRR for each of these projects? (5%) Using the IRR decision rule,
which project should the company accept? (5%)
b. If the required return is 10 percent, what is the NPV for each of these projects?
(5%) Which project will the company choose if it applies the NPV decision rule?
(5%)
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