Bruin, Inc., has identified the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 –$ 28,000 –$ 28,000 1 13,400 3,800 2 11,300 9,300 3 8,700 14,200 4 4,600 15,800 A) What is...

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Finance

Bruin, Inc., hasidentified the following two mutually exclusive projects:

Year Cash Flow (A) Cash Flow (B)
0 –$ 28,000 –$ 28,000
1 13,400 3,800
2 11,300 9,300
3 8,700 14,200
4 4,600 15,800
A) What is the IRR for each of these projects?
B) Using the IRR decision rule, which project should the companyaccept?
C) Is this decision necessarily correct?
D) If the required return is 10 percent, what is the NPV foreach of these projects?
E) Which project will the company choose if it applies the NPVdecision rule?
F) At what discount rate would the company be indifferentbetween these two projects?

Answer & Explanation Solved by verified expert

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SolutionI have calculated IRR and NPV in Excel and we can answeraccordinglyPart A IRR for Project A is 1613 and IRR for project B See Answer

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Bruin, Inc., hasidentified the following two mutually exclusive projects: YearCash Flow (A)Cash Flow (B)0–$28,000–$28,000113,4003,800211,3009,30038,70014,20044,60015,800A) What is the IRR for each of these projects?B) Using the IRR decision rule, which project should the companyaccept?C) Is this decision necessarily correct?D) If the required return is 10 percent, what is the NPV foreach of these projects?E) Which project will the company choose if it applies the NPVdecision rule?F) At what discount rate would the company be indifferentbetween these two projects?

Year	Cash Flow (A)		Cash Flow (B)
0	–$	28,000	–$	28,000
1		13,400		3,800
2		11,300		9,300
3		8,700		14,200
4		4,600		15,800