Question
A company has $250,000 to invest in either Project A or Project B with the following cash flows: Year Project A Project B 1 $50,000
A company has $250,000 to invest in either Project A or Project B with the following cash flows:
Year | Project A | Project B |
1 | $50,000 | $20,000 |
2 | $50,000 | $40,000 |
3 | $50,000 | $80,000 |
4 | $50,000 | $150,000 |
5 | $50,000 | $30,000 |
The current cost of capital is 10%.
Required:
- Calculate for each project the:
- Simple payback period
- Discounted payback period
- Net present value
- Internal rate of return
- Profitability index
- Based on your results in (1), advise the firm on which project to undertake.
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Cost Accounting A Managerial Emphasis
Authors: Srikant M. Datar, Madhav V. Rajan, Charles T. Horngren, Louis Beaubien, Chris Graham
7th Canadian Edition
133138445, 978-0133926330, 133926338, 978-0133138443
