Consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation (BRC). Both projects require an annual return of 18 percent.

Year Deepwater Fishing New Submarine Ride

0 $1,035,000 $2,020,000

1 455,000 1,070,000

2 578,000 885,000

3 505,000 920,000

a-1.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.)

Deepwater Fishing______%Submarine Ride_______%

a-2.Based on the IRR, which project should you choose?

Deepwater Fishing____

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?

Submarine Ride_____

Deepwater Fishing____

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

Deepwater Fishing $________

Submarine Ride $_________

c-2.Based on the NPV, which project should you choose?

Submarine Ride_________

Deepwater Fishing_______

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

Yes

No