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Consider two mutually exclusive R&D projects that ADM is considering. Assume the discount rate for ADM is 13 percent. Project A: Server CPU .13 micron processing project By shrinking the die size to .13 micron, ADM will be able to offer server CPU chips with lower power consumption and heat generation, meaning faster CPUs. Project B: New telecom chip project Entry into this industry will require introduction of a new chip for cell phones. The know-how will require a large amount of up-front capital, but success of the project will lead to large cash flows later on. Year Project A Project B 0 –$ 845,000 –$ 1,064,000 1 368,000 267,000 2 397,000 388,000 3 269,000 388,000 4 194,000 432,000 5 148,000 519,000

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Based on the cashflows and initial investments of Projects A and B by ADM, the incremental IRR is 22.24%.

What is the Incremental IRR?

This is a financial measure that compares projects with different cashflows. It does so by taking the net present value of the cashflows to zero.

It can be found by using a spreadsheet with the function IRR but you'll first have to find the difference between the cashflows of the two projects:

As shown on the attachment, the Incremental IRR is:

= 22.24%

Rest of the question is:

What is the incremental IRR of investing in the larger project?

Find out more on incremental IRR at https://brainly.com/question/24260114.

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