Capital Budgeting Methods

Project S has a cost of $10,000 and is expected to produce benefits (cash flows) of $3,500 per year for 5 years. Project L costs $25,000 and is expected to produce cash flows of $8,000 per year for 5 years.

Calculate the two projects' NPVs, assuming a cost of capital of 14%. Do not round intermediate calculations. Round your answers to the nearest cent.

Project S: $

Project L: $

Which project would be selected, assuming they are mutually exclusive?

Based on the NPV values,

-Select-

would be selected.

Calculate the two projects' IRRs. Do not round intermediate calculations. Round your answers to two decimal places.

Project S:

%

Project L:

%

Which project would be selected, assuming they are mutually exclusive?

Based on the IRR values,

-Select-

would be selected.

Calculate the two projects' MIRRs, assuming a cost of capital of 14%. Do not round intermediate calculations. Round your answers to two decimal places.

Project S:

%

Project L:

%

Which project would be selected, assuming they are mutually exclusive?

Based on the MIRR values,

-Select-

would be selected.

Calculate the two projects' PIs, assuming a cost of capital of 14%. Do not round intermediate calculations. Round your answers to three decimal places.

Project S:

Project L:

Which project would be selected, assuming they are mutually exclusive?

Based on the PI values,

-Select-

would be selected.

Which project should actually be selected?