Project a Costs $84,500 and Has Cash Flows of $32,300,$36,400,and

question 48

Multiple Choice

Project A costs $84,500 and has cash flows of $32,300,$36,400,and $30,000 for Years 1 to 3,respectively.Project B has an initial cost of $79,000 and has cash flows of $30,000,$36,000,and $29,000 for Years 1 to 3,respectively.What is the incremental IRR of these two mutually exclusive projects?

• A)18.11 percent
• B)−13.01 percent
• C)14.91 percent
• D)16.75 percent
• E)−20.37 percent

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Definitions:

Revenue Accounts

Accounts that track the income a business receives from its various activities, such as sales of products or services.

Loss Accounts

Accounts used to record the loss in value of assets or to represent expenses that reduce net income.

Revenue Recognition

The accounting principle that determines the specific conditions under which revenue is recognized or accounted for.

Inventory Purchased

Goods bought by a company for the purpose of resale in the ordinary course of business.