An organization is evaluating two projects, E and F, which require an initial investment of $180,000. The
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An organization is evaluating two projects, E and F, which require an initial investment of $180,000. The anticipated cash flows are as follows:
Year | Project E | Project F |
1 | $60,000 | $25,000 |
2 | $60,000 | $50,000 |
3 | $60,000 | $75,000 |
4 | $60,000 | $90,000 |
5 | $60,000 | $60,000 |
The firm's cost of capital is 8%.
Required: i. Calculate the following for each project:
- Simple payback period
- Discounted payback period
- Net present value
- Internal rate of return
- Profitability index ii. Advise the company on the most suitable project.
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