You Are Analyzing Two Mutually Exclusive Projects and Have Developed

question 39

Multiple Choice

You are analyzing two mutually exclusive projects and have developed the following information.What is the incremental IRR? $\begin{array}{cll}\underline{\text { Year }} & \begin{array}{l}\text { Project A } \\\underline{\text { Cash Flow }}\end{array} & \begin{array}{l}\text { Project B } \\\underline{\text { Cash Flow }}\end{array} \\ 0 &-\$ 84,500 &-\$76,900\\1 & \$ 29,000 & \$ 25,000 \\2 & \$ 40,000 & \$ 35,000 \\3 & \$ 27,000 & \$ 26,000\end{array}$

• A)11.11%
• B)13.01%
• C)14.91%
• D)16.75%
• E)17.90%

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Definitions:

Salary Increase

An increment in the amount of money earned by an employee on a regular basis, often annually or based on a performance review.

Total Return

The overall return on an investment over a specific period, including both capital gains and income, such as dividends or interest.

Quarterly Dividend

A distribution of a portion of a company's earnings, decided by the board of directors, paid to shareholders every quarter.

Preferred Shares

Types of stock that provide dividends before dividends are distributed to common stockholders and typically do not provide voting rights.