Question
ABC corporation is planning to invest in either of project A and project B. The projected cash flows are given below: Project A Project B
ABC corporation is planning to invest in either of project A and project B. The projected cash flows are given below:
| Project A | Project B |
Year | Cashflows | Cashflows |
0 | -100,000 | -300,000 |
1 | 15000 | 50000 |
2 | 20000 | 75000 |
3 | 30000 | 200000 |
4 | 50000 | 250000 |
5 | 75000 | 100000 |
1) Calculate the discounted payback period at 10% rate, which project should be accepted and why?
2) Calculate the IRR, and decide which project should be accepted, why?
3) Calculate the profitability index, and decide which project should be accepted, why?
(Require in an step by step calculation for each of the given questions)
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