ZuoTi.Pro
Question

Project Airmax has an initial cost of $609,247 and projected cash flows of $279,500, $316,700, and...

Project Airmax has an initial cost of $609,247 and projected cash flows of $279,500, $316,700, and $182,900 for Years 1 to 3, respectively. Project Best Sound has an initial cost of $423,500 and projected cash flows of $182,500, $192,400, and $176,310 for Years 1 to 3, respectively. What is the incremental IRR of these two mutually exclusive projects?

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Incremental IRR is IRR for incremental cashflows.

Year Project Airmax Project Best Sound Incremental cashflows
0 - 609,247 -423,500 -185,747
1    279,500 182,500 97,000
2 316,700        192,400 124,300
3 182,900 176,310 6,590
IRR 13.78%

IRR for incremental cashflows can be calculated using financial calculator or IRR function in excel.

Therefore, incremental IRR = 13.78% p.a.

0 0
Add a comment
Know the answer?
Add Answer to:
Project Airmax has an initial cost of $609,247 and projected cash flows of $279,500, $316,700, and...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • 4. Project S has a cost of $10,000 and is expected to produce cash flows of...

    4. Project S has a cost of $10,000 and is expected to produce cash flows of $3000 per year for 5 years. Project L has a cost of $25,000 and is expected to produce cash flows of $7400 for 5 years. Calculate the NPV and IRR of the two projects assuming a cost of capital of 12%. Which project would you select, assuming they are mutually exclusive, using each ranking method?

  • 1. A firm is starting a new project that will cost $200,000. It is projected to...

    1. A firm is starting a new project that will cost $200,000. It is projected to last 5 years and to generate cash flows of $50,000, $70,000, $90,000, $50,000 and $30,000 from Years 1 through 5 respectively. If the discount rate is 10%, what is the EAA of this project? Round to the nearest penny. Do not include any unit such as $, %, etc. 2. Use the following information to answer next three questions:   IO                    PI        IRR                 LIFE Project...

  • Project A has cash flows of −$92,000, $49,400, $27,200, $24,500, and $30,690 for Years 0 to...

    Project A has cash flows of −$92,000, $49,400, $27,200, $24,500, and $30,690 for Years 0 to 4, respectively. Project B has an initial cost of $50,000 and an annual cash inflow of $20,500 for four years. The required rate of return is 18 percent. These are mutually exclusive projects. Which project(s) should be accepted or rejected?

  • Project S has a cost of $10,000 and is expected to produce benefits (cash flows) of...

    Project S has a cost of $10,000 and is expected to produce benefits (cash flows) of $3,500 per year for 5 years. Project L costs $25,000 and is expected to produce cash flows of $8,000 per year for 5 years. a. Calculate the two projects' NPVS, assuming a cost of capital of 14%. Round your answers to the nearest cent Project S Project L Which project would be selected, assuming they are mutually exclusive? -Select b. Calculate the two projects'...

  • Two mutually exclusive projects have the following projected cash flows: Year Project A Cash flow Project...

    Two mutually exclusive projects have the following projected cash flows: Year Project A Cash flow Project B Cash Flow 0 -$50,000 -$50,000 1 25,625 0 2 25,625 0 3 25,625 0 4 25,625 0 5 15,625 150,000 If the required rate of return on these projects is 20 percent, what are the NPVs of two projects? Which project should be better? If they are standalone projects, what is the choice? If IRRA = 40.36%, IRRB = 24.57%, which project should...

  • Consider two mutually exclusive projects with the following cash flows: Project S is a 4 year...

    Consider two mutually exclusive projects with the following cash flows: Project S is a 4 year project with initial (time 0) cash outflow of 3000 and time 1 through 4 cash inflows of 1500, 1200, 800 and 300 respectively. Project L is a 4 year project with initial (time 0) cash outflow of 3000 and time 1 through 4 cash inflows of 400, 900, 1300, and 1500 respectively. Assuming a 5% cost of capital, compute the IRR for project S.

  • Project A has cash flows of −$50,000, $49,400, $27,200, and $24,500 for Years 0 to 3,...

    Project A has cash flows of −$50,000, $49,400, $27,200, and $24,500 for Years 0 to 3, respectively. Project B has an initial cost of $50,000 and an annual cash inflow of $18,500 for four years. These are mutually exclusive projects. What is the crossover rate? Can someone show how to do this without an excel sheet? I need to know how to break down the problem to really understand it.

  • Consider two mutually exclusive projects with the following cash flows: Project A is a 6 year...

    Consider two mutually exclusive projects with the following cash flows: Project A is a 6 year project with initial (time 0) cash outflow of 40,000 and time 1 through 6 cash inflows of 8000,14000,13000,12000,11000,and 10000 respectively. Project B is a 3 year project with initial (time 0) cash outflow of 20,000 and time 1 through 3 cash inflows of 7000,13000, and 12000 respectively. Assuming a 11.5% cost of capital compute the NPV for project A.

  • Project A has a required return on 9.2 percent and cash flows of −$87,000, $32,600, $35,900,...

    Project A has a required return on 9.2 percent and cash flows of −$87,000, $32,600, $35,900, and $43,400 for Years 0 to 3, respectively. Project B has a required return of 12.7 percent and cash flows of −$85,000, $14,700, $21,200, and $89,800 for Years 0 to 3, respectively. Which project(s) should you accept based on net present value if the projects are mutually exclusive? Multiple Choice Accept both projects Accept either one, but not both Accept Project A and reject...

  • Project S has a cost of $10,000 and is expected to produce benefits (cash flows) of...

    Project S has a cost of $10,000 and is expected to produce benefits (cash flows) of $3,000 per year for 5 years. Project L costs $25,000 and is expected the produce cash flows of $7,400 per year for 5 years. Calculate the two projects' NPVs, IRRs, MIRRs and Pls assuming a cost of capital of 12%? Which project would be selected assuming they are mutually exclusive, using each ranking method? Which project should actually be selected?

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT