Question: Consider the following two mutually exclusive projects: Year _________Cash Flow (A) _____Cash Flow (B) 0 .................-$455,000.................. -$65,000 1.................... 58,000......................31,000 2....................85,000......................28,000 3....................85,000......................25,500 4...................572,000.....................19,000 Whichever project you

Consider the following two mutually exclusive projects:

Year _________Cash Flow (A) _____Cash Flow (B)

0 .................-$455,000.................. -$65,000

1.................... 58,000......................31,000

2....................85,000......................28,000

3....................85,000......................25,500

4...................572,000.....................19,000

Whichever project you choose, if any, you require a return of 11 percent 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?

Step by Step Solution

★★★★★

3.38 Rating (157 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock

Input area Annual cash flows A B Year 0 455000 65000 Year 1 58000 31000 Year 2 85000 28000 Ye... View full answer

blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Document Format (1 attachment)

Excel file Icon

1107-B-C-F-D-P(400).xlsx

300 KBs Excel File

Students Have Also Explored These Related Corporate Finance Questions!

Q:

Consider the following two mutually exclusive projects available to Global Investments, Inc.: The appropriate discount rate for the projects is 10 percent. Global Investments chose to undertake...

Q:

Consider the following two mutually exclusive projects available to Global Investments, Inc. The appropriate discount rate for the projects is 10 percent. Global Investments chose to undertake...

Q:

Consider the following two mutually exclusive projects: Sketch the NPV profiles for X and Y over a range of discount rates from zero to 25 percent. What is the crossover rate for these two projects?...

Q:

Consider the following two mutually exclusive projects Year Cash Flow A Cash Flow B 0 -300 000 -40,000 1 20 000 19 000 2 50 000 12 000 3 50 000 18 000 4 390 000 10 500 Assume your require a 10...

Q:

Consider the following two mutually exclusive projects Year Cash Flow A Cash Flow B 0 -300 000 -40,000 1 20 000 19 000 2 50 000 12 000 3 50 000 18 000 4 390 000 10 500 If you apply the Net Present...

Q:

Consider the following two mutually exclusive projects: Year Cash Flow A Cash Flow B 0 -300 000 -40,000 1 20 000 19 000 2 50 000 12 000 3 50 000 18 000 4 390 000 10 500 If you apply the discounted...

Q:

Year Cash Flow A Cash Flow B 0 -300 000 -40,000 Consider the following two mutually exclusive projects 1 20 000 19 000 2 50 000 12 000 3 50 000 18 000 4 390 000 10 500 Assume your require a 10...

Q:

Merseyside - Full Erosion Rotterdam image below Merseyside - 20% Erosion Rotterdam image below Merseyside - 50% Erosion Rotterdam image below Merseyside - No Erosion Rotterdam image below Summary of...

Q:

I need help with these questions. I will pay $30. This submission limit to $8 only. Can I get by tomorrow noon. 11/16/2017.Please provide excel with calculations Question 2 Assume that you are...

Q:

I need some help filling out the excel and questions ATLAS METALS QUESTIONS 1. Explain why Jim Brakeman's method of monitoring project managers' ROIs may have contributed to an increase in the...

Q:

The network below represents a project being analyzed by the critical path method. Activity durations are A=5, B=2, C=12, D=3, E=5, F=1, G=7, H=2, I=10, and J=6. a. What task must be on the critical...

Q:

Find the volume of the wedge in figure below by integrating the area of vertical cross sections. Assume that a = 3, b = 7 and c = 10.

Q:

(a) Distinguish between (i) ordinary, (ii) special and (iii) extraordinary resolutions. Indicate, in particular, the length of notices and matters in respect of which each resolution is required. AND...

Q:

Compare and contrast the three types of bonds: corpo rate, U.S. government, and municipal government. 91.Describe how the principal on a Treasury inflationprotected security can increase over the...

Q:

Assuming the following ratios are constant, what is the sustainable growth rate? Total asset turnover 2.15 %3D Profit margin = 4.3% Equity multiplier = 1.62 Payout ratio = 40%

Q:

Prepare the 2009 and 2010 common size balance sheets for Bethesda Mining. BETHESDA MINING COMPANY Balance Sheets as of December 31, 2009 and 2010 2009 2010 2009 2010 Liabilities and Owners' Equity...

Q:

Suppose that the Bethesda Mining Company had sales of $2,156,873 and net income of $109,381 for the year ending December 31, 2010. Calculate the Du Pont identity. BETHESDA MINING COMPANY Balance...

Q:

Define a function named all_larger_than that checks (returns true or false) whether all elements in a given integer array are larger than a given (threshold) integer. For example, if the given array...

Q:

1.A manufacturing machine has a 4% defect rate. An inspector chooses 5 items at random. Use the binomial distribution. Round answers to 4 decimal places. a) What is the probability that at least one...

Q:

An industry-leading company seeks a qualified candidate for a management position. A management consultancy carries out an assessment centre which concludes in making a positive or negative...