Question
A company is evaluating projects I and J, each needing an initial investment of $50,000. The cash inflows are as follows: Year Project I Project
A company is evaluating projects I and J, each needing an initial investment of $50,000. The cash inflows are as follows:
Year | Project I | Project J |
1 | $20,000 | $15,000 |
2 | $15,000 | $20,000 |
3 | $10,000 | $25,000 |
4 | $5,000 | $10,000 |
Requirements:
- Determine the NPV of each project with a 12% discount rate.
- Calculate the IRR for each project.
- Compute the profitability index for each project.
- Discuss which project is better if the projects are mutually exclusive.
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Principles of managerial finance
Authors: Lawrence J Gitman, Chad J Zutter
12th edition
9780321524133, 132479540, 321524136, 978-0132479547
