Question
Bright Future Ltd. is considering two projects, Project Sunrise and Project Sunset . Each requires an initial investment of $750,000. The expected cash inflows are:
Bright Future Ltd. is considering two projects, Project Sunrise and Project Sunset. Each requires an initial investment of $750,000. The expected cash inflows are:
Year | Project Sunrise | Project Sunset |
0 | -$750,000 | -$750,000 |
1 | $100,000 | $200,000 |
2 | $150,000 | $150,000 |
3 | $200,000 | $100,000 |
4 | $250,000 | $50,000 |
a. Calculate the payback period for both projects. b. Evaluate the projects using the Profitability Index (PI) method, assuming a discount rate of 9%.
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Principles of Managerial Finance
Authors: Lawrence J. Gitman, Chad J. Zutter, Wajeeh Elali, Amer Al Roubaix
Arab World Edition
1408271583, 978-1408271582
