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 both projects. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)     NPV Deepwater Fishing $ Submarine Ride $   c-2. Based on the NPV, which project should you choose?   Deepwater Fishing Submarine Ride c-3. Is the NPV rule consistent with the incremental IRR rule?   Yes No

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
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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 both projects. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
 

  NPV
Deepwater Fishing $
Submarine Ride $
 


c-2. Based on the NPV, which project should you choose?
 

  • Deepwater Fishing
  • Submarine Ride



c-3. Is the NPV rule consistent with the incremental IRR rule?
 

  • Yes
  • No

 

 
 
 
 
 
 
 
 
 
 
 
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