Question:
You work for an outdoor play structure manufacturing company and are trying to decide between two projects:
Year-end cash flows ($ thousands)
Project.................0...................1..............2...............IRR
Playhouse .........-30.................15............20............10.4%
Fort....................-80.................39............52.............8.6%
You can undertake only one project. If your cost of capital is 8%, use the incremental IRR rule to make the correct decision.