A firm is evaluating two projects, K and L, with an initial investment of $200,000. The projects
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A firm is evaluating two projects, K and L, with an initial investment of $200,000. The projects have the following cash flows:
Year | Project K | Project L |
1 | $75,000 | $20,000 |
2 | $75,000 | $50,000 |
3 | $75,000 | $90,000 |
4 | $75,000 | $70,000 |
5 | $75,000 | $40,000 |
The discount rate is 13%.
Required: a. Calculate for each project:
- Simple payback period
- Discounted payback period
- Net present value
- Internal rate of return
- Profitability index b. Provide a recommendation based on your findings.
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