Chapter 5

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. Fishing 0 -$1,020,000 $1,990,000 Ride 440,0001,040,000 566,000 490,000 3 890,000 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.) a-1. IRR Deepwater Fishing Submarine Ride a-2. Based on the IRR, which project should you choose? O Deepwater Fishing O Submarine Ride b-1. Calculate the incremental IRR for the cash fows (Do not round intermediate calculations. Enter our 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 t the NPV for both projects. (Do not round intermediate calculations. 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? Submarine Rde a-2. Based on the IRR, which project should you choose? O Deepwater Fishing O Submarine Ride 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 O Submarine Ride c-1. Compute the NPV for both projects. (Do not round intermediate calculations. Round your answers to 2 decimal places, e.g.32.16.) NPV Deepwater Submarine Ride Fishing c2. Based on the NPV, which project should you choose? Deepwater Fishing Submarine Ride c-3. Is the NPV decision consistent with the incremental IRR rule? Yes No References eBook &Resources Worksheet