The future cash flows of two mutually exclusive capital projects follow: Project A: Uneven Flow Year0123 Cash
Question:
The future cash flows of two mutually exclusive capital projects follow:
Project A: Uneven Flow
Year0123
Cash Flow(-$12,000)$6,500$10,500$6,000
Project B: Annuity Flow
Year0123456**Annuity**
Cash Flow(-$30,000)$8,500$8,500$8,500$8,500$8,500$8,500
Calculate the following for each project. The discount rate (required return) is 8%.
(a) What are the Net Present Values (NPVs) for Project A and Project B?
Project A:Project B:
(b) What are the Internal Rates of Returns (IRR's) for Project A and Project B?
Project A:Project B:
(c) What are the Equivalent Annual Annuities (EAA's) for Project A and Project B?
Project A:Project B:
(d) What are the Profitability Indexes (PI's) for Project A and Project B?
Project A:Project B:
(e) What are the payback periods for Project A and Project B?
Project A:Project B:
(f) Which project would you pick given that they are mutually exclusive projects? Why?
Corporate Finance
ISBN: 978-0077861759
10th edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe