$650,000 1 $330,000 2 $310,000 3 $260,000 -$975,000 $490,000 $460,000 $410,000 10% $650,000 $330,000 0.038461538 $640,000 2.04 $975,000 2 Year 3 Mini-SUV Cash flows 4 5 Full-SUV Cash flows 6 7 Required return (used as the discount rate) 8 Part 1: 9 Mini-SUV Initial cash outlay 10 Accumulated cash inflows 11 Payback period 12 13 Full SUV Initial cash outlay 14 Accumulated cash inflows 15 Payback period 16 17 Which project should be taken? 18 19 Part 2: 20 Mini-SUV Present value of cash inflows 21 Present value of cash outflows 22 Profitability index 23 24 Full SUV Present value of cash inflows 25 Present value of cash outflows 26 Profitability index $490,000 0.06097561 $950,000 2.06 Mini-SUV 300,000.00 $ 256,198.35$ 195,341.85 $ -$650,000 1.1562 1.1562 445,454.55$ 380,165.29 $ 308,039.07 $ -$975,000 1.1627 1.1627 27 Full-SUV 28 Which project should be taken? 29 30 Part 3: 31 Mini-SUV Internal rate of return (IRR) 32 Full-SUV Internal rate of return (IRR) 33 Which project should be taken? 34 35 Part 4: 36 Mini-SUV Net present value (NPV) 37 Full-SUV Net present value (NPV) 38 Which project should be taken