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ABC Ltd. is analyzing two potential projects, Project P and Project Q, with the following characteristics: Project P: Cost of Capital - 7%, Initial Investment
ABC Ltd. is analyzing two potential projects, Project P and Project Q, with the following characteristics:
- Project P: Cost of Capital - 7%, Initial Investment - $300,000, Cash Inflow Year 1 - $70,000, Cash Inflow Year 2 - $90,000, Cash Inflow Year 3 - $110,000
- Project Q: Cost of Capital - 10%, Initial Investment - $400,000, Cash Inflow Year 1 - $100,000, Cash Inflow Year 2 - $120,000, Cash Inflow Year 3 - $140,000 Conduct a discounted cash flow analysis for Project P and Project Q. Calculate the payback period and profitability index for each project. Provide a recommendation on which project should be undertaken and justify your decision.
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