Consider two mutually exclusive R&D projects that ADM is considering. Assume the discount rate for ADM is 12 percent.

Project A:	Server CPU .13 micron processing project
	By shrinking the die size to .13 micron, ADM will be able to offer server CPU chips with lower power consumption and heat generation, meaning faster CPUs.

Project B:	New telecom chip project
	Entry into this industry will require introduction of a new chip for cell phones. The know-how will require a large amount of up-front capital, but success of the project will lead to large cash flows later on.

Year

Project A

Project B

0

$

735,000

$

943,000

1

346,000

261,000

2

364,000

369,000

3

258,000

366,000

4

183,000

419,000

5

126,000

504,000

Complete the following table: (Do not round intermediate calculations. Enter the IRR as a percent. Round your profitability index (PI) answers to 3 decimal places (e.g., 32.161) and other answers to 2 decimal places (e.g., 32.16).)

	Project A			Project B
NPV	$			$
IRR		%			%
PI

What is the incremental IRR of investing in the larger project? (Do not round intermediate calculations. Enter your answer as a percent and round your answer to 2 decimal places (e.g., 32.16).)

Incremental IRR

%