80.2K

Verified Solution

Link Copied!

7 Consider the following cash flows on two independent projects for ABC Corporation. Both projects require an annual return of 8 percent. If ABC Corporation applies the IRR decision rule, which project should it choose? Why or why not?

Consider the following cash flows on two independent projects for ABC Corporation. Both projects require an annual return of 8 percent. If ABC Corporation applies the IRR decision rule, which project should it choose? Why or why not? Year Project A Project B 0 -$42,000 -$65,000 1 $15,300 $15,000 2 $18,400 $38,400 3 $18,500 $15,500 Group of answer choices None; Both IRR are less the required return. Project A; The IRR exceeds the required return by about 3.32 percent. Project B; The IRR exceeds the required return by about 2.96 percent. Both; Both IRR exceed the required return. Project A; The IRR is less than the required return by about 3.32 percent.

Group of answer choices

None; Both IRR are less the required return.

Project A; The IRR exceeds the required return by about 3.32 percent.

Project B; The IRR exceeds the required return by about 2.96 percent.

Both; Both IRR exceed the required return.

Project A; The IRR is less than the required return by about 3.32 percent.

Answer & Explanation Solved by verified expert

See Answer