Problem $5-11$ NPV versus IRR

Consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation $($BRC$).$ Both projects require an annual return of $15$ percent.

Year Deepwater Fishing New Submarine Ride

$0$$ $970,000$$ $1,890,000$

$1390,000940,000$

$2526,000820,000$

$3440,000790,000$

a$-1.$ Compute the IRR for both projects. $($Do not round intermediate calculations and enter your answers as a percent rounded to $2$ decimal places, e$.$g$.,32\mathrm{.}16.)$

a$-2.$

Based on the IRR, which project should you choose?

multiple choice $1$

Submarine Ride

Deepwater Fishing

b$-1.$

Calculate the incremental IRR for the cash flows. $($Do not round intermediate calculations and enter your answer as a percent rounded to $2$ decimal places, e$.$g$.,32\mathrm{.}16.)$

b$-2.$

Based on the incremental IRR, which project should you choose?

multiple choice $2$

Deepwater Fishing

Submarine Ride

c$-1.$

Compute the NPV for both projects. $($Do not round intermediate calculations and round your answers to $2$ decimal places, e$.$g$.,32\mathrm{.}16.)$

c$-2.$

Based on the NPV$,$ which project should you choose?

multiple choice $3$

Submarine Ride

Deepwater Fishing

c$-3.$ Is the NPV decision consistent with the incremental IRR rule?

multiple choice $4$

Yes

No