Question: 1. Scale differences: two mutually-exclusive investment projects have the following forecasted cash flows: Year -$40,000 $79,836 +$12,216 +$22,193 +$12,216 +$22,193 +$12,216 +$22,193 +$12,216 +$22,193 +$12,216

 1. Scale differences: two mutually-exclusive investment projects have the following forecasted

1. Scale differences: two mutually-exclusive investment projects have the following forecasted cash flows: Year -$40,000 $79,836 +$12,216 +$22,193 +$12,216 +$22,193 +$12,216 +$22,193 +$12,216 +$22,193 +$12,216 +$22,193 a. Compute the NPV of both projects at a 0 percent cost of capital. b. Compute the NPV of both projects at a 6 percent cost of capital. c. Based on your answers to part b, which project should be adopted? d. Calculate the IRR of both projects to the nearest whole percent. e. Which project should be accepted using the IRR rule? f. What in the incremental IRR to the nearest whole percent? (Hint: your answers to parts c and d should give you a fairly good idea of where the incremental IRR is situated) g. How would you analyze both investments suing the incremental IRR

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!