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Item 6

Problem 8-10 NPV versus IRR [LO 3, 4]

Piercy, LLC, has identified the following two mutually exclusive projects:

Year	Cash Flow (A)				Cash Flow (B)
0		$	51,000			$	51,000
1			27,000				14,900
2			21,000				18,900
3			16,500				23,000
4			12,200				25,900

a-1.	What is the IRR for each of these projects? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
a-2.	If you apply the IRR decision rule, which project should the company accept?
b-1.	Assume the required return is 10 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.)
b-2.	Which project will you choose of you apply the NPV decision rule?
c-1.	Over what range of discount rates would you choose Project A? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
c-2.	Over what range of discount rates would you choose Project B? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
d.	At what discount rate would you be indifferent between these two projects? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)