NPV versus IRR Consider the following cash flows on two mutually exclusive projects for the BahamasRecreation Corporation (BRC). Both projects require an annual return of 14 percent.Deepwater Fishing-$725,000270,000420,000380,000Year0123New Submarine Ride-$1,450,000820,000650,000540,000As a 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 cashflows. 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 withthe incremental IRR rule?

Internal Rate of Return, sometimes known as IRR, is a financial statistic used to assess the…

Answered: NPV versus IRR Consider the following…

Principles of Accounting Volume 2

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Chapter11: Capital Budgeting Decisions

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Problem 7PA: There are two projects under consideration by the Rainbow factory. Each of the projects will require...

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Consider the following cash flows on two mutually exclusive projects for the B.C. Recreation Corporation (BCRC). Both projects require an annual return of 13 percent. aw Bubmarine Ride - 51,950, D0 Year Deupvater Fishing -5530,000 230,000 1,150, D00 000 ,39ב 700, D00 250,000 790, DD0 As a financial analyst for BCRC, you are asked to answer the following questions: a-1. Calculate the IRR for both projects. (Do not round Intermediate calculations. Round the answer to 2 decimal places.) Deepvater Finhing Nuw Subnarine Ride a-2. If your decision rule is to accept the project with the greater IRR, which project should you choose? O Deepwater Fishing O New Submarine Ride b-1. Calculate the incremental IRR for the projects. (Do not round intermediate calculations. Round the answer to 2 decimal places.) Incremental IRR b-2. Because you are fully aware of the IRR rule's scale problem, you calculate the incremental IAR for the cash flows. Based on your computation, which project should you…
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…
Consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation. Both projects require an annual return of 18 percent. Year Deepwater Fishing Submarine Ride 0 −$ 1,035,000 −$ 2,020,000 1 455,000 1,070,000 2 578,000 885,000 3 505,000 920,000 a-1. Compute the IRR for both projects. Note: 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? b-1. Calculate the incremental IRR for the cash flows. Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. b-2. Based on the incremental IRR, which project should you choose? c-1. Compute the NPV for both projects. Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. c-2. Based on the NPV, which project should you choose? c-3. Is the NPV rule consistent with…
Consider the following cash flows on two mutually exclusive projects for the Bahama Recreation Corporation (BRC). Both projects require an annual return of 14 percent. Year Deepwater Fishing 0 -$955,000 1 375,000 2 514,000 3 425,000 New Submarine Ride 1,860,000 910,000 805,000 760,000 a-1. Compute the IRR for both projects. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Deepwater Fishing Submarine Ride % %
Consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation. Both projects require an annual return of 16 percent. Year Deepwater Fishing New Submarine Ride 0 −$ 985,000 −$ 1,920,000 1 405,000 970,000 2 538,000 835,000 3 455,000 820,000 a-1. Compute the IRR for both projects. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) IRR Deepwater Fishing % Submarine Ride % a-2. Based on the IRR, which project should you choose? Submarine Ride Deepwater Fishing b-1. Calculate the incremental IRR for the cash flows. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Incremental IRR % b-2. Based on the incremental IRR, which project should you choose? Deepwater Fishing Submarine Ride c-1. Compute the NPV for…
Pound Industries is attempting to select the best of three mutually exclusive projects. The initial investment and after-tax cash inflows associated with these projects are shown in the following table. Cash flows Project A Project B Project C Initial Investment (CFo) $60,000 $100,000 $110,000 Cash ınflows (CFt), t=1 to 5 20,000 31,500 32,500 a.Calculate the payback period for each project. b.Calculate the net present value (NPV) of each project, assuming that the firm has a cost of capital equal to 13%. c.Calculate the internal rate of return (IRR) for each project. d.Summarize the preferences dictated by each measure, and indicate which project you would recommend. Explain why.
5 Consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation. Both projects require an annual return of 16 percent. Deepwater Year Fishing Submarine Ride 0 -$995,000 1 415,000 -$ 1,940,000 990,000 2 546,000 845,000 3 465,000 840,000 a-1. Compute the IRR for both projects. Note: 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? b-1. Calculate the incremental IRR for the cash flows. Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. b-2. Based on the incremental IRR, which project should you choose? c-1. Compute the NPV for both projects. Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. c-2. Based on the NPV, which project should you choose? c-3. Is the NPV rule consistent with the incremental IRR…
The following are the net cash flow estimates (in thousands of dollars) of the two (2) proposed projects, you are planning to invest in. Expected Net Cash Flow Year Restaurant & Bar Hardware $M $M 0 (200) (200) 1 10 70 2 60 50 3 100 40…
There are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment of $35,000 and is expected to generate the following cash flows: Use the information from the previous exercise to calculate the internal rate of return on both projects and make a recommendation on which one to accept. For further instructions on internal rate of return in Excel, see Appendix C.
The following are the net cash flow estimates (in thousands of dollars) of the two (2) proposed projects, you are planning to invest in. Expected Net Cash Flow Year Restaurant & Bar Hardware $M $M 0 (200) (200) 1 10 70 2 60…
Carol, Inc. is considering three different independent investment opportunities. The present value of future cash flows, initial investment, and net present value for each of the projects are as follows: Project A Project B Project C Present value of future cash flows $ 651,200 $ 476,700 $ 585,200 Initial investment 280,000 235,000 270,000 Net present value $ 371,200 $ 241,700 $ 315,200 In what order should Carol prioritize investment in the projects? Multiple Choice A, B, C C, A, B C, B, A A, C, B
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