Comparing Investment Criteria [LO1, 2, 3, 5, 7] Consider the following two mutually exclusive projects: Year...
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Comparing Investment Criteria [LO1, 2, 3, 5, 7] Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 -$291,000 -$41,600 1 37,000 20,000 2 55,000 17,600 3 55,000 17,200 4 366,000 14,000 Whichever project you choose, if any, you require a return of 11 percent 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 parts (a) through (e), which project will you finally choose? Why? Comparing Investment Criteria [LO1, 2, 3, 5, 7] Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 -$291,000 -$41,600 1 37,000 20,000 2 55,000 17,600 3 55,000 17,200 4 366,000 14,000 Whichever project you choose, if any, you require a return of 11 percent 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 parts (a) through (e), which project will you finally choose? Why?
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Related Book For
College Algebra With Modeling And Visualization
ISBN: 9780134418049
6th Edition
Authors: Gary Rockswold
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