1 Basic Question 15 Comparing Investment Criteria Consider the following two mutually exclusive projects: Year Cash flow (A) Cash Flow (B) 0 456,250 50,000 47,500 25,370 2 58,700 19,000 3 77,500 17,620 4 568,700 14,000 If the entity has a required return of 12%: (A) Calculate the payback period for the two projects and advise which project you would accept and why? N (B) Calculate the NPV for the two projects and advise which project would accepts and why? (C) If the IRR for project A was 15.41% and the IRR for project B was 21.51% which project would you accept and why? (D) Calculate the profitability index value for the two projects and advise which project you would accept and why? (E) Based on answers A to D above and considering the nature of the project which measure should you use to make your final decision and why? Basic Question 15 Comparing Investment Criteria Consider the following two mutually exclusive projects: Year Cash flow (A) Cash Flow (B) 0 456,250 50,000 1 47,500 25,370 2 58,700 19,000 3 77,500 17,620 4 568,700 14,000 If the entity has a required return of 12%: (A) Calculate the payback period for the two projects and advise which project you would accept and why? (B) Calculate the NPV for the two projects and advise which project would accepts and why? (C) If the IRR for project A was 15.41% and the IRR for project B was 21.51% which project would you accept and why? (D) Calculate the profitability index value for the two projects and advise which project you would accept and why? (E) Based on answers A to D above and considering the nature of the project which measure should you use to make your final decision and why