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.© BrainMass Inc. brainmass.com June 4, 2020, 12:19 am ad1c9bdddf
Please refer attached file for better clarity of solution.
First, we find incremental cash flows as shown in following table.
Then find incremental IRR by ...
Solution describes the methodology to find incremental IRR for deciding between two projects by using MS Excel.