a. Given the following cash flows, for the two independent projects A and B, calculate i.
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Question:
a. Given the following cash flows, for the two independent projects A and B, calculate
i. Payback Period
ii. Accounting rate of return
iii. Net Present Value
iv. Profitability index
And recommend acceptance or rejection of projects considering individual techniques of capital budgeting. A rate of 10 % has been selected for the NPV analysis.
Project A Project B
Initial outlay $50,000 $100,000
Cash inflows
Year 1 $10,000 $ 25,000
Year 2 15,000 25,000
Year 3 20,000 25,000
Year 4 25,000 25,000
Year 5 30,000 25,000
b. Explain the distinctive features of capital budgeting decisions.
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