Consider the following cash flows from two mutually exclusive projects for the Bahamas Recreation Company. Both projects require a 16 percent annual return.

Year	Deep Water Fishing			New Submarine Cruise
0	−$	990.000		−$	1.930.000
1		410.000			980.000
2		542.000			840.000
3		460.000			830.000

a-1. Calculate the IRR for both projects. (Do not round up intermediate calculations. Enter your answers in percentages rounded to 2 decimal places, for example 32.16.)

	IRR
Deep Water Fishing	%
submarine journey	%

a-2. Which project should you choose according to the IRR?

• submarine journey

• Deep Water Fishing

b-1. Calculate incremental IRR for cash flows. (Do not round up intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places, for example 32.16.)

Incremental IRR %

b-2. Which project should you choose based on incremental IRR?

• submarine journey

• Deep Water Fishing

c-1. Calculate NPV for both projects. (Do not round up intermediate calculations and round your answers to 2 decimal places, eg 32.16.)

	NBD
Deep Water Fishing	$
submarine journey	$

c-2. Which project should you choose according to NBD?

• submarine journey

• Deep Water Fishing

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

• NO

• Yes

Answer rating: 100% (QA)

a1To calculate the IRR we can use financial functions available in spreadsheet software like Excel or Google Sheets For this example Ill use Excel fun... View the full answer