MBA518 Financial Management Assignment 5 Investment Decision Making

You are considering two independent projects, Project A and Project B.The initial cash outlay associated with Project A is $50,000 and the initial cash outlay associated with Project B is $70,000.The discount rate on both projects is 12 percent.The expected annual cash flows from each project are as follows:

Year Project A Project B

0 $(50,000) %(70,000)

1 12,000 13,000

2 12,000 13,000

3 12,000 13,000

4 12,000 13,000

5 12,000 13,000

6 12,000 13,000

Calculate the NPV, PI, and IRR for each project and indicate if the project should be accepted or not.

Discuss the differences between the three values you found - compare and contrast these three methods.