Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 $425,000 $40,000
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Question:
Consider the following two mutually exclusive projects: |
Year | Cash Flow (A) | Cash Flow (B) |
0 | $425,000 | $40,000 |
1 | 44,000 | 20,400 |
2 | 62,200 | 13,300 |
3 | 79,000 | 18,600 |
4 | 454,000 | 15,400 |
The required return on these investments is 10 percent. |
Required: | |
(a) | What is the payback period for each project? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).) |
Payback period | |
Project A | years |
Project B | years |
(b) | What is the NPV for each project? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).) |
Net present value | |
Project A | $ |
Project B | $ |
(c) | What is the IRR for each project? (Do not round intermediate calculations. Enter your answers as a percentage rounded to 2 decimal places (e.g., 32.16).) |
Internal rate of return | |
Project A | % |
Project B | % |
(d) | What is the profitability index for each project? (Do not round intermediate calculations. Round your answers to 3 decimal places (e.g., 32.161).) |
Profitability index | |
Project A | |
Project B | |
(e) | Based on your answers in (a) through (d), which project will you finally choose? |
(Click to select)Project AProject B |
Related Book For
Fundamentals of corporate finance
ISBN: 978-0078034633
10th edition
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan
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