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Unformatted text preview: Annual cash flows: Fishing Submarine Year 0 ($750,000) $(2,100,000) Year 1 $310,000 $1,200,000 Year 2 $430,000 $760,000 Year 3 $330,000 $850,000 Discount rate 14% Output area: a) IRR (Fishing) 19.83% IRR (Submarine) 17.36% b) Incremental CF Year 0 $(1,350,000) Year 1 $890,000 Year 2 $330,000 Year 3 $520,000 Incremental IRR 15.78% c) NPV (Fishing) $320,000.00 NPV (Submarine) $710,000.00 Chapter 5 Question 14 Input area: Annual cash flows: Board Game CDROM Year 0 Year 1 Year 2 Year 3 Required return Output area: a. Payback (Board game) 0.00 Payback (CDROM) 0.00 Payback criterion implies accept CDROM because it pays back sooner. b. NPV (Board game) $ NPV (CDROM) $ NPV criterion implies accept CDROM because it has a higher NPV. c. IRR (Board game) Err:523 IRR (CDROM) Err:523 IRR decision rule implies accept Err:523 because its IRR is greater. d. Year Incremental CF $ 1 $ 2 $ 3 $ Incremental IRR Err:523 Err:523...
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This note was uploaded on 08/30/2010 for the course MANAGEMENT 3467783 taught by Professor Langly during the Summer '10 term at University of Phoenix.
 Summer '10
 Langly

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