A company has $250,000 to be invested in either project A or project B with the following
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Question:
A company has $250,000 to be invested in either project A or project B with the following cash flows:
YearProject AProject B
1$80,000$20,000
2$80,000$40,000
3$80,000$70,000
4$80,000$150,000
5$80,000$50,000
The current cost of capital is 10%.
Required: a) Calculate for each project the:
1.Simple payback period
2.Discounted payback period
3.Net present value
4.Internal rate of return
5.Profitability index
b) Based on your results in (a) above, advise the firm on which project to undertake.
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