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Thompson Manufacturing
Thompson Manufacturing is considering two investment proposals.The first involves a quality improvement project,and the second is about an advertising campaign.The cash flows associated with each project appear below.

-Refer to Tompson Manufacturing.Suppose the hurdle rate of the firm is 10%.Calculate the cash flows of the "incremental project" by subtracting the cash flows of the second project from the cash flows of the first project.What is the IRR of the incremental project?

Question

NARRBEGIN: Thompson Manufacturing
Thompson Manufacturing
Thompson Manufacturing is considering two investment proposals.The first involves a quality improvement project,and the second is about an advertising campaign.The cash flows associated with each project appear below.
 
-Refer to Tompson Manufacturing.Suppose the hurdle rate of the firm is 10%.Calculate the cash flows of the "incremental project" by subtracting the cash flows of the second project from the cash flows of the first project.What is the IRR of the incremental project?

Quizplus · Accepted Answer

Cash flow of the incremental project: 11ea7e38_8c52_b415_a2f7_d76e5c519fca_TB2250_00 Let r represent the IRR of the incremental project. -70,000/(1+r)-15,000/(1+r)² + 115,000/(1+r)³= 0 r = 17.9%

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