Question: Comparing Investment Criteria Consider the following two mutually exclusive projects: Whichever project you choose, if any, you require a 15 percent return on your investment.

Comparing Investment Criteria Consider the following two mutually exclusive projects:

Cash Flow (A) Cash Flow (B) Year -S 350,000 -S 35,000 17,000

Whichever project you choose, if any, you require a 15 percent return on your investment.

a. If you apply the payback criterion, which investment will you choose? Why?

b. If you apply the discounted payback criterion, which investment will you choose? Why?

c. If you apply the NPV criterion, which investment will you choose? Why?

d. If you apply the IRR criterion, which investment will you choose? Why?

e. If you apply the profitability index criterion, which investment will you choose? Why?

f. Based on your answers in (a) through (e), which project will you finally choose?Why?

Cash Flow (A) Cash Flow (B) Year -S 350,000 -S 35,000 17,000 25,000 70,000 11,000 70,000 17,000 430,000 11,000 2. 4,

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a The payback period for each project is A 3 185000430000 343 years B 2 700017000 241 years The payb... View full answer

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