Question: Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 $432,000 $43,500 1 40,500 21,100 2 65,500 12,600 3 82,500
Consider the following two mutually exclusive projects:
| Year | Cash Flow (A) | Cash Flow (B) |
| 0 | $432,000 | $43,500 |
| 1 | 40,500 | 21,100 |
| 2 | 65,500 | 12,600 |
| 3 | 82,500 | 22,100 |
| 4 | 547,000 | 18,900 |
| The required return on these investments is 13 percent. |
| Required: | |
| (a) | What is the payback period for each project? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).) |
| Payback period | |
| Project A | years |
| Project B | years |
| (b) | What is the NPV for each project? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).) |
| Net present value | |
| Project A | $ |
| Project B | $ |
| (c) | What is the IRR for each project? (Do not round intermediate calculations. Enter your answers as a percentage rounded to 2 decimal places (e.g., 32.16).) |
| Internal rate of return | |
| Project A | % |
| Project B | % |
| (d) | What is the profitability index for each project? (Do not round intermediate calculations. Round your answers to 3 decimal places (e.g., 32.161).) |
| Profitability index | |
| Project A | |
| Project B | |
| (e) | Based on your answers in (a) through (d), which project will you finally choose? |
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