A firm is considering investing $450,000 in either Project G or Project H. The projected cash flows
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Question:
A firm is considering investing $450,000 in either Project G or Project H. The projected cash flows are:
Project G:
- Year 1: $90,000
- Year 2: $80,000
- Year 3: $70,000
- Year 4: $60,000
- Year 5: $50,000
Project H:
- Year 1: $60,000
- Year 2: $70,000
- Year 3: $80,000
- Year 4: $90,000
- Year 5: $100,000
The discount rate is 16%.
Required:
- For each project, calculate:
- Payback period
- Discounted payback period
- Net present value
- Internal rate of return
- Profitability index
- Based on your analysis, advise the firm on which project to undertake.
Related Book For
Principles of managerial finance
ISBN: 978-0132479547
12th edition
Authors: Lawrence J Gitman, Chad J Zutter
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