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

Year Deepwater Fishing Submarine Ride

$0$$ $1,050,000$$ $2,050,000$

$1470,0001,100,000$

$2590,000900,000$

$3520,000950,000$

a$-1.$ Compute the IRR for both projects.

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

b$-1.$ Calculate the incremental IRR for the cash flows.

b$-2.$ Based on the incremental IRR, which project should you choose?

c$-1.$ Compute the NPV for both projects.

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

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