Finding the Incremental IRR
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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
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.
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Solution Summary
This solution explains the use of the incremental IRR rule for project selection and illustrates how to utilize this rule in the response which has been constructed using an Excel spreadsheet.
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