Question
A2Z Corporation is experiencing hard capital rationing and will not be able to invest more than $1,000,000 this year. The firm is considering four mutually
A2Z Corporation is experiencing hard capital rationing and will not be able to invest more than $1,000,000 this year. The firm is considering four mutually exclusive projects with the cash flows presented below. If the firms cost of capital is 10% per year, answer the following questions:
Period | CFs of Project A, $ | CFs of Project B, $ | CFs of Project C, $ | CFs of Project D, $ |
0 | -750,000 | -1,000,000 | -1,000,000 | -250,000 |
1 | 350,000 | 400,000 | 500,000 | 120,000 |
2 | 350,000 | 500,000 | 500,000 | 100,000 |
3 | 350,000 | 600,000 | 500,000 | 150,000 |
Find each projects net present value and explain what the results suggest
Find each projects profitability index and explain what the results suggest
Find each projects internal rate of return and explain what the results suggest
Given the above findings, which project(s) should the firm accept and why?
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