Year Deepwater Fishing New Submarine Ride 0 −$ 985,000 −$ 1,920,000 1 405,000 970,000 2 538,000 835,000 3 455,000 820,000 a-1. Compute the IRR for both projects. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) IRR Deepwater Fishing % 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. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Incremental IRR % b-2. Based on the incremental IRR, which project should you choose? Deepwater Fishing Submarine Ride c-1. Compute the NPV for both projects. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) NPV Deepwater Fishing $ Submarine Ride $ c-2. Based on the NPV, which project should you choose? Deepwater Fishing Submarine Ride c-3. Is the NPV rule consistent with the incremental IRR rule? Yes No
Year Deepwater Fishing New Submarine Ride 0 −$ 985,000 −$ 1,920,000 1 405,000 970,000 2 538,000 835,000 3 455,000 820,000 a-1. Compute the IRR for both projects. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) IRR Deepwater Fishing % 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. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Incremental IRR % b-2. Based on the incremental IRR, which project should you choose? Deepwater Fishing Submarine Ride c-1. Compute the NPV for both projects. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) NPV Deepwater Fishing $ Submarine Ride $ c-2. Based on the NPV, which project should you choose? Deepwater Fishing Submarine Ride c-3. Is the NPV rule consistent with the incremental IRR rule? Yes No
Financial And Managerial Accounting
15th Edition
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:WARREN, Carl S.
Chapter26: Capital Investment Analysis
Section: Chapter Questions
Problem 2CMA: Staten Corporation is considering two mutually exclusive projects. Both require an initial outlay of...
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Question
100%
Consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation. Both projects require an annual return of 16 percent.
| Year | Deepwater Fishing | New Submarine Ride | ||||
| 0 | −$ | 985,000 | −$ | 1,920,000 | ||
| 1 | 405,000 | 970,000 | ||||
| 2 | 538,000 | 835,000 | ||||
| 3 | 455,000 | 820,000 | ||||
a-1. Compute the
| IRR | |
| Deepwater Fishing | % |
| 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. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Incremental IRR %
b-2. Based on the incremental IRR, which project should you choose?
-
Deepwater Fishing
-
Submarine Ride
c-1. Compute the
| NPV | |
| Deepwater Fishing | $ |
| Submarine Ride | $ |
c-2. Based on the NPV, which project should you choose?
-
Deepwater Fishing
-
Submarine Ride
c-3. Is the NPV rule consistent with the incremental IRR rule?
-
Yes
-
No
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