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Given the potential for more visitors, the town of Highland Falls is evaluating four mutually...

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Finance

Given the potential for more visitors, the town of Highland Falls is evaluating four mutually exclusive projects. Given the following net cash flows, use IRR in conjunction with Incremental Analysis to identify the best project. The MARR is 7%, compounded annually. Solve the following using Excel.

Year (n)

Project A

Project B

Project C

Project D

0

$ -65,000.00

$ -37,000.00

$ -83,000.00

$ -79,000.00

1

$ 16,500.00

$ -16,500.00

$ -

$ 20,000.00

2

$ 29,000.00

$ 31,000.00

$ -

$ 31,000.00

3

$ 30,000.00

$ 31,000.00

$ 102,000.00

$ 41,000.00

IRR

7.18%

6.96%

7.15%

A. Solve for the IRR for Project C.

B. Write down the equation you would use to solve for the IRR for Project B. Do not solve.

C. Based on the IRRs, which projects would you continue to consider and why?

D. Use Incremental Analysis to identify the best project. Explain your decision and show your decision criteria.

E. What is your recommendation and why?

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