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:

Year Cash Flow (A) Cash Flow (B) 0 1 2 3 4

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. lf 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?

Year Cash Flow (A) Cash Flow (B) 0 1 2 3 4 -$350,000 45,000 65,000 65,000 440,000 -$50,000 24,000 22,000 19,500 14,600

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To evaluate the projects we must calculate values based on various criteria Lets go through each one a Payback Criterion Project A Year 0 350000 Year ... View full answer

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