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Project A has an initial cost of $75,000 and annual cash flows of $33,000 for three years. Project B costs $60,000 and has cash flows of $25,000, $30,000, and $25,000 for Years 1 to 3, respectively. Projects A and B are mutually exclusive. The incremental IRR is _______ and if the required rate is higher than the crossover rate then Project _______ should be accepted.

Respuesta :

ogorwyne

Answer:

12.89%, project b

Explanation:

Solution:

75000 - 60000 = 15000

33000 - 25000 = 8000

33000 - 30000 = 3000

33000 - 25000 = 8000

Irr = 15.28% 15 86%

Then the incremental iRR is calculated as 12.89%, such that if the required rate is higher then project b should be accepted.

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