Cost of capital is 9.97% annually. Both are independent projects. a. What is the financial manager's goal
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Cost of capital is 9.97% annually. Both are independent projects. a. What is the financial manager's goal in selecting investment projects for the firm? Explain the capital budgeting process and how it helps managers achieve their goal. b. Calculate the IRR, simple payback period and discounted payback period for Project S and R. Summarize the preferences dictated by each measure you calculated, and indicate which project you would recommend. Explain why. c. Under what circumstances a firm might be better off with a rapid payback rather than a larger NPV? Explain.
Projects S | Project R | |
Initial Investment | $ 98000 | |
Year(n) | Cash inflow | |
1 | 23500 | 19000 |
2 | 21000 | 19000 |
3 | 25000 | 19000 |
4 | 25000 | 19000 |
5 | 4000 | 19000 |
Related Book For
Principles Of Managerial Finance
ISBN: 978-0136119463
13th Edition
Authors: Lawrence J. Gitman, Chad J. Zutter
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