Calculate the payback period, ARR, IRR and NPV (at 12%) for two proposed four-year projects, B1 and
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Question:
- Calculate the payback period, ARR, IRR and NPV (at 12%) for two proposed four-year projects, B1 and B2, the cash flows (EBDIT) for which are as follows:
Year | 0 | 1 | 2 | 3 | 4 |
B1 | -60,000 | 9,000 | 10,000 | 25,000 | 30,000 |
B2 | -60,000 | 30,000 | 25,000 | 10,000 | 9,000 |
(Assume that straight-line depreciation is applicable and that there is no income tax.)
Why are the NPV and IRR of project B2 superior to B1?
Related Book For
Fundamentals Of Corporate Finance
ISBN: 9780072553079
6th Edition
Authors: Stephen A. Ross, Randolph Westerfield, Bradford D. Jordan
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