Consider the following two mutually exclusive projects:

Year Cash Flow (A) Cash Flow (B)

0 $ 291,000 $ 41,600

1 37,000 20,000

2 55,000 17,600

3 55,000 17,200

4 366,000 14,000

Whichever project you choose, if any, you require a return of 11 percent on your investment.

a-1. What is the payback period for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

Project A _______ Years

Project B _______ Years

a-2. If you apply the payback criterion, which investment will you choose? multiple choice 1 Project A Project B

b-1. What is the discounted payback period for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

Project A _______ Years

Project B ________ Years

b-2. If you apply the discounted payback criterion, which investment will you choose? multiple choice 2 Project A Project B

c-1. What is the NPV for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

Project A _______

Project B ______

c-2. If you apply the NPV criterion, which investment will you choose? multiple choice 3 Project A Project B

d-1. What is the IRR for each project? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

Project A ____ %

Project B _____ %

d-2. If you apply the IRR criterion, which investment will you choose? multiple choice 4 Project A Project B

e-1. What is the profitability index for each project? (Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.)

Project A _______

Project B ______

e-2. If you apply the profitability index criterion, which investment will you choose? multiple choice 5 Project A Project B

f. Based on your answers in (a) through (e), which project will you finally choose? multiple choice 6 Project A Project B