Question
A firm is considering the following two mutually exclusive projects A and B. The required rate of return is 20% for each project. Year Cash
A firm is considering the following two mutually exclusive projects A and B. The required rate of return is 20% for each project.
| Year | Cash Flow (A) | Cash Flow (B) |
| 0 | -$350,000 | -$35,000 |
| 1 | 25,000 | 17,000 |
| 2 | 70,000 | 11,000 |
| 3 | 70,000 | 17,000 |
| 4 | 430,000 | 11,000 |
(1) Based on the payback period criterion, which project would you choose? Why?
(2) Based on the NPV criterion, which project would you choose? Why?
(3) Based on the IRR criterion, which project would you choose? Given your answer in (2) where you used the NPV criteria, is your choice the right one? Explain why or why not.
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Military Finances Personal Money Management For Service Members Veterans And Their Families
Authors: Cheryl Lawhorne-Scott, Don Philpott
1st Edition
144222214X, 978-1442222144
