Question: Question 2 Project Selection Dragon Products Company is considering two projects. The projects cash flows are as follows: Cash Flow PROJECT A 0 ($9300) 1

Question 2


Project Selection


Dragon Products Company is considering two projects. The projects cash flows are as follows:



Cash Flow

PROJECT A

0

($9300)

1

2500

2

1730

3

1500

4

3600

5

2500

6

2200

Discount Rate

4.2%




REQUIRED


  1. Find the Payback Period


  1. What is the discounted PBP?



  1. Calculate the Net Present Value of the project and?


  1. What is the profitability index of ?


  1. Calculate the IRR of the project using trial and error method..


  1. Why is sunk cost not considered when deciding about selecting a project? Which cost is considered and why?



[60 marks]

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