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Evaluate projects with IRR rule; NPV vs IRR, discount rate

Calculating IRR
A firm evaluates all of its projects by applying the IRR rule.

Year Cash Flow
0 -$ 30,875
1 18,000
2 17,000
3 8,000

Requirement 1:
Determine the IRR for the above project.

20.24%
21.30%
22.37%
20.87%
21.73%

Requirement 2:
If the required return is 27 percent, should the firm accept the above project?

No
Yes

NPV versus IRR
Bumble's Bees, Inc., has identified the following two mutually exclusive projects:

Year Cash Flow (A) Cash Flow (B)
0 -$ 37,000 -$ 37,000
1 19,000 6,000
2 14,500 12,500
3 12,000 19,000
4 9,000 23,000

Required:
(a) What is the IRR for Project A?

20.91%
19.69%
19.29%
21.32%
20.3%

(b) What is the IRR for Project B?

19.11%
19.48%
17.99%
18.55%
17.62%

(c) If the required return is 11 percent, what is the NPV for Project A?

$6,917.95
$6,259.09
$6,786.18
$6,390.86
$6,588.52

(d) If the required return is 11 percent, what is the NPV for Project B?

$7,214.42
$7,366.31
$7,821.95
$7,594.13
$7,973.84

(e) At what discount rate would the company be indifferent between these two projects?

13.54%
14.25%
13.82%
14.68%
14.96%

$2.19