Question
A company is analyzing the investment of $160,000 in either Project O or Project P. The projected cash flows are as follows: Year Project O
A company is analyzing the investment of $160,000 in either Project O or Project P. The projected cash flows are as follows:
Year | Project O | Project P |
1 | $50,000 | $12,000 |
2 | $50,000 | $28,000 |
3 | $50,000 | $47,000 |
4 | $50,000 | $100,000 |
5 | $50,000 | $43,000 |
The discount rate is 10%.
Required:- Calculate for each project:
- Simple payback period
- Discounted payback period
- Net present value
- Internal rate of return
- Profitability index
- Which project should the company choose and why?
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Financial Accounting Tools for Business Decision Making
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso, Barbara Trenholm, Wayne Irvine
6th Canadian edition
1118644948, 978-1118805084, 1118805089, 978-1118644942
