b. Consider the following two mutually exclusive projects: Cash Flow (A) (400,000) 30,000 60,000 70,000 520,000...

 

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b. Consider the following two mutually exclusive projects: Cash Flow (A) (400,000) 30,000 60,000 70,000 520,000 Year 0 1 2 3 4 Cash Flow (B) (75,000) 45,000 30,500 20,000 10,500 Whichever project you choose, if any, you require a 10 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. 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? b. Consider the following two mutually exclusive projects: Cash Flow (A) (400,000) 30,000 60,000 70,000 520,000 Year 0 1 2 3 4 Cash Flow (B) (75,000) 45,000 30,500 20,000 10,500 Whichever project you choose, if any, you require a 10 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. 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?