5. QuizCo would like to use the IRR method to choose between projects A and B below. QuizCo'sMARR is 10%. Each project lasts 5 years.(a) Calculate the IRR for each project. Check with Excel using the IRR function, the ratefunction, and Goal Seek. Include the Excel output in your Assignment.(b) Calculate the incremental IRR.(c) Which project should be selected based on incremental IRR?ProjectFirst CostAnnual Savings12,00013,000A34503700

IRR stands for internal rate of return refers to the percentage of return on capital invested by the…

Answered: Which project should be selected based…

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Which project should be selected based on incremental IRR?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

5. QuizCo would like to use the IRR method to choose between projects A and B below. QuizCo's
MARR is 10%. Each project lasts 5 years.
(a) Calculate the IRR for each project. Check with Excel using the IRR function, the rate
function, and Goal Seek. Include the Excel output in your Assignment.
(b) Calculate the incremental IRR.
(c) Which project should be selected based on incremental IRR?
Project
First Cost
Annual Savings
12,000
13,000
A
3450
3700

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