Question: The following table presents financial information regarding two alternative projects. The salvage value is expected to be zero for both projects at the end of

The following table presents financial information regarding two alternative projects.

The salvage value is expected to be zero for both projects at the end of five years. The company uses a discount rate of 10% for such project evaluations. Ignore income taxes.

Required:
a. Rank the two projects using the net present value method. Which project is preferable?
b. Rank the two projects using payback periods. Which project is preferable?
c. Rank the two projects using modified payback periods. Which project ispreferable?

Project Project 2 S6.750.000 S6,750.000 Net cash inflows-year 1 2,000,000 2,500,000 Net cash inflows-yea 2 2,000,000 2,500,000 Net cash inflows-year 32,000,000 2,500,000 Net cash inflowsyear 4 1.400,000 800,000 800.000 Initial cash outlay Net cash inflows-year 5 1,400,000

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