Consider the following two mutually exclusive projects Year Cash Flow (A) Cash Flow (B) 0 $ 359,000
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Question:
Consider the following two mutually exclusive projects |
Year | Cash Flow (A) | Cash Flow (B) |
---|---|---|
0 | −$ 359,000 | −$ 45,500 |
1 | 36,000 | 23,100 |
2 | 56,000 | 21,100 |
3 | 56,000 | 18,600 |
4 | 431,000 | 13,700 |
Whichever project you choose, if any, you require a return of 14 percent on your investment. |
a-1. | What is the payback period for each project? |
a-2. | If you apply the payback criterion, which investment will you choose? |
b-1. | What is the discounted payback period for each project? |
b-2. | If you apply the discounted payback criterion, which investment will you choose? |
c-1. | What is the NPV for each project? |
c-2. | If you apply the NPV criterion, which investment will you choose? |
d-1. | What is the IRR for each project? |
d-2. | If you apply the IRR criterion, which investment will you choose |
e-1. | What is the profitability index for each project? |
e-2. | If you apply the profitability index criterion, which investment will you choose? |
Based on your answers in (a) through (e), which project will you finally choose?
Related Book For
Financial Management Theory and Practice
ISBN: 978-1305632295
15th edition
Authors: Eugene F. Brigham, Michael C. Ehrhardt
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