Consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation. Bothe Projects require annual return of 18 percent.
Year Deepwater Fishing New Submarine Ride
0 $-1,040,000 $-2,030,000
1 $460,000 $1,080,000
2 $582,000 $890,000
3 $510,000 $930,000
a-1. Compute the IRR for both Projects. (Dont round intermediate calculations. Enter your answers as a percent rounded 2 decimals)
Deepwater Fishing?
Submarine Ride?
a-2. Based on the IRR, which project would you choose?
b-1. Calculate the Incremental IRR for the cash flows. ( Do not round intermediate calculation. Enter your answers as rounded 2 decimals and as a percent.)
Deepwater Fishing?
Submarine Ride?
b-2. Based on the Incremental IRR, Which project would you choose?
c-1. Compute the NPV for both project. (Do not round intermediate calculations. Enter your answers as a dollar and rounded 2 decimals.
Deepwater Fishing $
Submarine Ride $
c-2 Based on the NPV, which project should you choose?
c-3. Is the NPV decision consistent with the incremental IRR Rule?