Problem $9-12$ NPV versus IRR $($LO$1,5)$

Parkallen Inc. has identified the following two mutually exclusive projects:

Year Cash Flow $($A$)$ Cash Flow $($B$)$

$0$$ $29,000$$ $29,000$

$114,4004,300$

$212,3009,800$

$39,20015,200$

$45,10016,800$

a$-1.$ What is the IRR for each of these projects? $($Do not round intermediate calculations. Round the final answers to $2$ decimal places.$)$

IRR

Project A

$\%$

Project B

$\%$

a$-2.$ Using the IRR decision rule, which project should the company accept?

multiple choice $1$

Project A

Project B

a$-3.$ Is this decision necessarily correct?

multiple choice $2$

Yes

No

b$-1.$ If the required return is $11\%,$ what is the NPV for each of these projects? $($Do not round intermediate calculations. Round the final answers to $2$ decimal places. Omit $ sign in your response.$)$

NPV

Project A $

Project B $

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

multiple choice $3$

Project A

Project B

c$.$ At what discount rate would the company be indifferent between these two projects? $($Do not round intermediate calculations. Round the final answer to $2$ decimal places.$)$

Discount rate

$\%$Problem $9-12$ NPV versus IRR $($LO$1,5)$

Parkallen Inc. has identified the following two mutually exclusive projects:

a$-1.$ What is the IRR for each of these projects? $($Do not round intermediate calculations. Round the final answers to $2$ decimal

places.$)$

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 $11\%,$ what is the NPV for each of these projects? $($Do not round intermediate calculations. Round the final

answers to $2$ decimal places. Omit $ sign in your response.$)$

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.

Round the final answer to $2$ decimal places.$)$

Discount rate