Question
A firm evaluates all of its projects by applying the NPV and IRR decision rules. A project under consideration has the following cash flows: Year
A firm evaluates all of its projects by applying the NPV and IRR decision rules. A project under consideration has the following cash flows:
| Year | Cash Flow (A) |
| 0 | -$350,000 |
| 1 | 45,000 |
| 2 | 65,000 |
| 3 | 65,000 |
| 4 | 440,000 |
You require a 15% percent return on your investment. (a) If you apply the NPV criterion, would you accept this project? Why?
(b) If you apply the IRR criterion, would you accept this project? Why?
(c) What is payback period for this project? (d) What is profitability index for this project?
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Financial Management Principles And Applications
Authors: Arthur J. Keown
9th Edition
013033362X, 9780130333629
