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:
- Simple Payback Period
- Net Present Value
- Profitability Index
- IRR
- Ranking using NPV, IRR, PI (in the order of acceptability)
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