FIN 3001 Exercise #2 Consider the following two mutually exclusive projects: t=0 -1,000,000 -1,000,000 t=1 900,000 Project S Project L The required rate of return is 10 percent. 0 t=2 250,000 250,000 t=3 10,000 400,000 t=4 10,000 800,000 1. Calculate the payback period for each project. Using the payback decision rule, which project should be accepted? 2. Calculate the discounted payback period for each project. Using the discounted payback decision rule, which project should be accepted? 3. Calculate the internal rate of return for each project. Using the IRR decision rule, which project should be accepted? 4. Calculate the net present value for each project. Using the NPV decision le. which project should be accepted? 5. Among four decision rules, which one should be followed?

Consider the following two mutually exclusive projects: The required rate of return is 10 percent. 1. Caiculate the payback period for each project Using the payback decision rule, which project should be accepted? 2. Calculate the discounted payback period for each project. Using the discounted payback decision rule, which project should be accepted? 3. Calculate the internal rate of return for each project. Using the IRR decision rule. Which project should be accepted? 4. Calculate the net present value for each project Using the NPV decision rule, which project should be aceepted? 5. Among four decision rules, which one should be followed