Criterion Sales is considering three alternative investment proposals but can only accept one of these. The...

   

Transcribed Image Text:

Criterion Sales is considering three alternative investment proposals but can only accept one of these. The investments and cash flows are shown below: Cash Flows DKK Year 1 Year 2 Year 3 Year 4 Year 5 Project A -150,000 50,000 75,000 75,000 50,000 Project B -200,000 75,000 75,000 75,000 75,000 Project C -300,000 50,000 100,000 150,000 100,000 Criterion uses discounted cash flow techniques to evaluate its investments, using a cost of capital (discount rate) of 12%. Compare for each alternative investment the: Net present value (NPV) Annuity value Profitability index (PI) Discounted and undiscounted payback period A) Which of the three investment proposals (A, B or C) would you prefer and why? Criterion Sales is considering three alternative investment proposals but can only accept one of these. The investments and cash flows are shown below: Cash Flows DKK Year 1 Year 2 Year 3 Year 4 Year 5 Project A -150,000 50,000 75,000 75,000 50,000 Project B -200,000 75,000 75,000 75,000 75,000 Project C -300,000 50,000 100,000 150,000 100,000 Criterion uses discounted cash flow techniques to evaluate its investments, using a cost of capital (discount rate) of 12%. Compare for each alternative investment the: Net present value (NPV) Annuity value Profitability index (PI) Discounted and undiscounted payback period A) Which of the three investment proposals (A, B or C) would you prefer and why?