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.

Year Deepwater Fishing. New Submarine Ride

0 - $1,000,000 -1,950,000

1 420,000 1,000,000

2 550,000 850,000

3 470,000 850,000

a-1. Compute the IRR for both projects. (Do not round intermediate calculations and enter your answers are a percent rounded to 2 decimal places, e.g., 32.16.)

Deepwater Fishing _________ %

Submarine Ride __________%

a-2. Based on the IRR, which project should you choose? (Please choose the correct answer.)

Deepwater Fishing

Submarine Ride

b-1. Calculate the incremental IRR for the cash flows. (Do not round intermediate calculations and 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?

Submarine Ride

Deepwater Fishing

c-1. Compute the NPV for both projects. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

Deepwater Fishing. _________

Submarine Ride. _________

c-2. Based on the NPC, which project should you choose? (Please choose the correct answer)

Submarine Ride

Deepwater Fishing

c-3. Is the NPC decision consistent with the incremental IRR rule? (Please choose the correct answer)

Yes

No