Question: Consider two mutually exclusive R&D projects that Savage Tech is considering. Assume the discount rate for both projects is 11 percent. Project A' Server CPU


Consider two mutually exclusive R&D projects that Savage Tech is considering. Assume the discount rate for both projects is 11 percent. Project A' Server CPU .13 micron processing project By shrinking the die size to .13 micron, the company will be able to offer server CPU chips with lower power consumption and heat generation, meaning faster CPUs. Project 8' New telecom chip project Entry into this industry will require introduction ofa new chip for cell phones. The knowhow will require a large amount of upfront capital, but success of the project will lead to large cash flows later on. Year Project A Project B 0 $ 775,000 $ 987,000 1 354,000 260,000 376,000 381,000 262,000 374,000 187,000 425,000 134,000 512,000 01-wa 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.) 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.) V_ Project A Project B What is the incremental IRR of investing in the larger project? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Incremental IRR _ %
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