Garage, Inc., has identified the following two mutually exclusive projects:

Year Cash Flow (A) Cash Flow (B) 0 $ 28,400 $ 28,400 1 13,800 4,000 2 11,700 9,500 3 8,900 14,600 4 4,800 16,200

a-1

What is the IRR for each of these projects? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

IRR Project A % Project B %

a-2

Using the IRR decision rule, which project should the company accept?

Project A Project B

a-3 Is this decision necessarily correct?

Yes No

b-1

If the required return is 12 percent, what is the NPV for each of these projects? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

NPV Project A $ Project B $

b-2 Which project will the company choose if it applies the NPV decision rule?

Project A Project B

c.

At what discount rate would the company be indifferent between these two projects? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Discount rate %

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