Homework 3 quest 2

Consider two mutually exclusive R&D projects that Savage Tech is considering. Assume the discount rate for both projects is 9 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 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 e $715, 000 $921, 000 D WN 342, 000 257, 000 358, 000 363, 000 256, 000 362, 000 181, 000 413,000 122, 000 498, 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