Consider the following two mutually exclusive projects:

Year	Cash Flow (A)	Cash Flow (B)
0	–$350,000	–$50,000
1	45,000	24,000
2	65,000	22,000
3	65,000	19,500
4	440,000	14,600

Whichever project you choose, if any, you require a 15 percent return on your investment.

a. If you apply the payback criterion, which investment will you choose? Why?

---

b.If you apply the discounted payback criterion, which investment will you choose? Why?

---

c. If you apply the NPV criterion, which investment will you choose? Why?

---

d. If you apply the IRR criterion, which investment will you choose? Why?

---

e.If you apply the profitability index criterion, which investment will you choose? Why?

---

f. Based on your answers in (a) through (e), which project will you finally choose? Why?

Answer rating: 100% (QA)

a b... View the full answer