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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 Preview

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

    Solution Summary

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