Question: Trying to understand step by step on how to do the below problem: Bumbles Bees, Inc. has identified the following two mutually exclusive projects: Year
Trying to understand step by step on how to do the below problem:
Bumbles Bees, Inc. has identified the following two mutually exclusive projects:
| Year | Project A | Project B |
| 0 | $17,000 | $17,000 |
| 1 | 8,000 | 2,000 |
| 2 | 7,000 | 5,000 |
| 3 | 5,000 | 9,000 |
| 4 | 3,000 | 9,500 |
What is the IRR for each of the projects? If you apply the IRR decision rule, which project should the company accept?
If the required rate is 11 percent, what is the NPV for each of the projects? Which project will you choose if you apply the NPV rule?
Calculate the payback periods. Which project will you choose if you apply the Payback Period rule?
Calculate the Profitability Indexes. Which project will you choose if you apply the Profitability Index rule?
What is you final decision? Explain.
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