Project A has an initial cost of $22,400 and cash flows of $7,100,$8,800,and $1,900 for Years 1 to 3,respectively.Project B has an initial cost of $37,200 and cash flows of $18,300,$17,900,and $2,700 for Years 1 to 3,respectively.What is the incremental IRR?
A)15.67%
B)13.54%
C)15.91%
D)23.38%
E)27.31%

Question

Quizplus · Accepted Answer

Incremental cash flows:Time 0: -$37,200 - (-$22,400)= -$14,800Year 1: $18,300 - 7,100 = $11,200Year 2: $17,900 - 8,800 = $9,100Year 3: $2,700 - 1,900 = $800Incremental IRR = -$14,800 + $11,200/(1 + IRR)+ $9,100/(1 + IRR)² + $800/(1 + IRR)³IRR = 27.31%

Project a Has an Initial Cost of $22,400 and Cash