Question: Consider the cash flows for Project 1 and Project 2 below: Year Project 1 Project 2 0 -$45,000 -$55,000 1 $10,000 $12,000 2 $11,000 $14,000
Consider the cash flows for Project 1 and Project 2 below:
Year | Project 1 | Project 2 |
0 | -$45,000 | -$55,000 |
1 | $10,000 | $12,000 |
2 | $11,000 | $14,000 |
3 | $13,000 | $16,000 |
4 | $15,000 | $18,000 |
5 | $17,000 | $20,000 |
a. Calculate the NPV for both projects at a discount rate of 7%. b. Determine the IRR for each project. c. Compute the payback period for each project. d. Find the profitability index for both projects. e. Decide which project should be selected if they are mutually exclusive.
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