Question: A firm is considering the following 2 mutually exclusive projects: Year Project B -89.5 0 1 Project A -26.5 23 28 37 2 37 50

A firm is considering the following 2 mutually exclusive projects: Year Project B -89.5 0 1 Project A -26.5 23 28 37 2

A firm is considering the following 2 mutually exclusive projects: Year Project B -89.5 0 1 Project A -26.5 23 28 37 2 37 50 3 16 4 20 47 Note: The IRRs for this question will require Excel (or a financial calculator). What is the internal rate of return of project A? % What is the internal rate of return of project B? % Which project would you choose based on the IRR rule? (No answer given) Project A Project B For which discount rate should the firm be indifferent between the 2 projects? %. Based on this information, which project would you choose if the applicable discount rate was 14.12%? (No answer given) Project B Project A

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