Flamingo, Incorporated, has identified the following two mutually exclusive projects:
YearCash Flow (A)Cash Flow (B)0−$ 28,300−$ 28,300113,7003,950211,6009,45038,85014,50044,75016,100
a-1. What is the IRR for each of these 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. Using the IRR decision rule, which project should the company accept?
multiple choice 1
Project A Correct
Project B
a-3. Is this decision necessarily correct?
multiple choice 2
Yes
No Correct
b-1. If the required return is 10 percent, what is the NPV for each of these projects?
Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.
b-2. Which project will the company choose if it applies the NPV decision rule?
multiple choice 3
Project A
Project B
c. At what discount rate would the company be indifferent between these two projects?
Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.