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P9-12 NPV versus IRR [LO1, 5] Mahjong, Inc., has identified the following two mutually exclusive projects:

P9-12 NPV versus IRR [LO1, 5]

Mahjong, Inc., has identified the following two mutually exclusive projects:

Year Cash Flow (A) Cash Flow (B)
0 –\$43,000 –\$43,000
1 23,000 7,000
2 17,900 13,800
3 12,400 24,000
4 9,400 26,000

Required:

(a)

The IRR for Projects A and B is _____percent and ____percent respectively. (Do not include the percent signs (%). Round your answers to 2 decimal places. (e.g., 32.16))

(b)

If the required return is 11 percent, the NPV for Projects A and B is \$ ____and \$_____, respectively. You will choose Project B if you apply the NPV decision rule. (Do not include the dollar signs (\$). Round your answers to 2 decimal places. (e.g., 32.16))

(c)

At a discount rate of _____percent, you would be indifferent between these two projects. (Do not include the percent sign (%). Round your answer to 2 decimal places. (e.g. 32.16)

P9-12 NPV versus IRR [LO1, 5]
Mahjong, Inc., has identified the following two mutually exclusive projects:
Year Cash Flow (A) Cash Flow (B)
0 –\$43,000 –\$43,000
1 23,000 7,000
2 17,900 13,800
3...

This question was asked on Oct 21, 2010 and answered on Oct 22, 2010.

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