Question: Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 $ -350,000 $ -50,000 1 45,000 24,000 2 65,000 22,000

Consider the following two mutually exclusive projects:

Year

Cash Flow (A)

Cash Flow (B)

-350,000

-50,000

45,000

24,000

65,000

22,000

65,000

19,500

440,000

14,600

Whichever project you choose, if any, you require a 15 percent return on your investment.

a. What is the payback period for each project?

b. What is the discounted payback period for each project?

c. What is the profitability index for each project?

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Project A Discount rate 15000 Year 0 1 2 3 4 Cash flow stream 350000 45000 65000 65000 440000 Discounting factor 1000 1150 1323 1521 1749 Discounted c... View full answer

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