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Finding incremental IRR to decide between two projects

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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

Play house -30 15 20 10.40%

Fort -80 39 52 8.60%

You can undertake only one project. If your cost of capital is 8%, use the incremental IRR rule to make the correct decision.

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Solution Summary

Solution describes the methodology to find incremental IRR for deciding between two projects by using MS Excel.

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Solution:

First, we find incremental cash flows as shown in following table.
Then find incremental IRR by ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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