Pierce Chocolates and Berry Sweets both have new projects that require an initial investment of $450,000...

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Pierce Chocolates and Berry Sweets both have new projects that require an initial investment of $450,000...

Pierce Chocolates and Berry Sweets both have new projects that require an initial investment of $450,000 and will have annual cash inflows of $110,000. If Pierce expects its project to last 5 years and Berry expects its project to last 6 years, which one has the higher internal rate of return?

A : The IRR cannot be determined with this data.

B : Pierce Chocolates

C : Berry Sweets

D : The IRR will be the same for both companies.

business accounting

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Answer 1

Answer #1

IRR =RATE(nper,pmt,pv)

IRR of project Pierce =RATE(5,110000,-450000) =7.08%

IRR of Berry =RATE(6,110000,-450000) =12.18%

The answer is C)

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Answer 2

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Pierce Chocolates and Berry Sweets both have new projects that require an initial investment of $450,000...

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