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

Consider the following two mutually exclusive projects:
Consider the following two mutually exclusive projects: Whichever project


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 NPV criterion, which investment will you choose? Why?

(c) If you apply the IRR criterion, which investment will you choose? Why?

(d) If you apply the profitability index criterion, which investment will you choose? Why?

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

YearCash Flow (A)Cash Flw (B) $325,000 43,000 51,000 69,000 480,000 0 -$30,000 15,800 13,100 12,700 9,700 3

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