Consider the following cash flows on two mutually exclusiveprojects for the Bahamas Recreation Corporation...

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Accounting

Consider the following cash flows on two mutually exclusiveprojects for the Bahamas Recreation Corporation (BRC). Bothprojects require an annual return of 18 percent.

Year Deepwater Fishing New Submarine Ride
0 ?$ 1,035,000 ?$ 2,020,000
1 455,000 1,070,000
2 578,000 885,000
3 505,000 920,000

a-1. Compute the IRR for both projects.(Do not round intermediate calculations. Enter your answersas a percent rounded to 2 decimal places, e.g.,32.16.)

IRR
  DeepwaterFishing %
  Submarine Ride %

a-2.
Based on the IRR, which project should you choose?

Submarine Ride
Deepwater Fishing

b-1.
Calculate the incremental IRR for the cash flows. (Donot round intermediate calculations. Enter your answer as a percentrounded to 2 decimal places, e.g., 32.16.)

  Incremental IRR %

b-2.
Based on the incremental IRR, which project should youchoose?

Submarine Ride
Deepwater Fishing

c-1.
Compute the NPV for both projects. (Do not roundintermediate calculations. Round your answers to 2 decimal places,e.g., 32.16.)


           NPV
  DeepwaterFishing $
  Submarine Ride $

c-2.
Based on the NPV, which project should you choose?

Submarine Ride
Deepwater Fishing

c-3. Is the NPV decision consistent withthe incremental IRR rule?
No
Yes

Answer & Explanation Solved by verified expert

4.0 Ratings (821 Votes)

a1 Compute the IRR for both projects Do not round intermediate calculations Enter your answers as a percent rounded to 2 decimal places eg 3216 Deepwater Fishing New Submarine Ride 0 1035000 2020000 1 455000 1070000 2 578000 885000 3 505000 920000 IRR using excel See Answer

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In: AccountingConsider the following cash flows on two mutually exclusiveprojects for the Bahamas Recreation Corporation (BRC)....Consider the following cash flows on two mutually exclusiveprojects for the Bahamas Recreation Corporation (BRC). Bothprojects require an annual return of 18 percent. YearDeepwater FishingNew Submarine Ride0?$1,035,000?$2,020,0001455,0001,070,0002578,000885,0003505,000920,000 a-1.Compute the IRR for both projects.(Do not round intermediate calculations. Enter your answersas a percent rounded to 2 decimal places, e.g.,32.16.) IRR DeepwaterFishing% Submarine Ride% a-2.Based on the IRR, which project should you choose? Submarine RideDeepwater Fishing b-1.Calculate the incremental IRR for the cash flows. (Donot round intermediate calculations. Enter your answer as a percentrounded to 2 decimal places, e.g., 32.16.) Incremental IRR% b-2.Based on the incremental IRR, which project should youchoose? Submarine RideDeepwater Fishing c-1.Compute the NPV for both projects. (Do not roundintermediate calculations. Round your answers to 2 decimal places,e.g., 32.16.) NPV DeepwaterFishing$ Submarine Ride$ c-2.Based on the NPV, which project should you choose? Submarine RideDeepwater Fishing c-3.Is the NPV decision consistent withthe incremental IRR rule?NoYes

Year	Deepwater Fishing		New Submarine Ride
0	?$	1,035,000	?$	2,020,000
1		455,000		1,070,000
2		578,000		885,000
3		505,000		920,000