Question: Given below are four projects (Projects A, B, C, and D) along with their initial investment and the three years future cash inflows. The required

Given below are four projects (Projects A, B, C, and D) along with their initial investment and the three years future cash inflows. The required rate of return is 15%.

NET PRESENT VALUE AND INTERNAL RATE OF RETURN

Project A

Project B

Project C

Project D

Initial Investment

($50,000)

($100,000)

($80,000)

($180,000)

Cash Flows

Year 1

20,000

35,000

20,000

100,000

Year 2

20,000

50,000

40,000

80,000

Year 3

20,000

50,000

60,000

60,000

Required return =

15%

15%

15%

15%

Compute for the following:

  1. Simple Payback Period
  2. Net Present Value
  3. Profitability Index
  4. IRR
  5. Ranking using NPV, IRR, PI (in the order of acceptability)

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