Question: Consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation. Both projects require an annual return of 17 percent. Year

Consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation. 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) Compute the IRR for both projects. Based on IRR, what project should I choose? (B) Calculate the incremental IRR for cash flows. Based on incremental IRR, what project should I choose? (C) Compute the NPV for both projects. Based on NPV, what project should I choose?

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