Question
A company is evaluating two mutually exclusive projects. Project A has an initial cost of $100,000 and is expected to generate cash inflows of $30,000
A company is evaluating two mutually exclusive projects. Project A has an initial cost of $100,000 and is expected to generate cash inflows of $30,000 at the end of each year for five years. Project B has an initial cost of $200,000 and is expected to generate cash inflows of $70,000 at the end of each year for five years. The company has a cost of capital of 12%.
a) Calculate the net present value (NPV) and profitability index (PI) for both projects.
b) Which project should the company choose based on the NPV and PI?
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Fundamentals Of Financial Management
Authors: James Van Horne, John Wachowicz
13th Revised Edition
978-0273713630, 273713639
