(Solved):Two mutually exclusive projects offer the following cash flows at year 0 and 1, Project X: 240…

 

Question

Two mutually exclusive projects offer the following cash flows at year 0 and 1,

Project X: -240 (year 0) and 580 (year 1),

Project Y: -10,060 (year 0) and 11,010 (year 1).

Calculate an incremental IRR of doing project Y and on that basis decide which project is preferable if the appropriate hurdle rate for each project is 8%. Choose the correct answer.

A. incremental IRR = 6.21% so that project Y should be

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