Explain the npv decision rule

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Reference no: EM131794757

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

Year	Cash Flow (A)		Cash Flow (B)
0	-$	30,000	-$	30,000
1		15,400		4,800
2		13,300		10,300
3		9,700		16,200
4		5,600		17,800

a-1 What is the IRR for each of these projects? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

a-2 Using the IRR decision rule, which project should the company accept?

a-3 Is this decision necessarily correct?

b-1 If the required return is 12 percent, what is the NPV for each of these projects? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

b-2 Which project will the company choose if it applies the NPV decision rule?

c. At what discount rate would the company be indifferent between these two projects? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Reference no: EM131794757

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