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Capital Budgeting Problem: (16.5 points) The future cash flows of two mutually exclusive capital projects follow: Project A: Uneven Flow Year 0 1 2 3
Capital Budgeting Problem: (16.5 points) The future cash flows of two mutually exclusive capital projects follow: Project A: Uneven Flow Year 0 1 2 3 $6,500 $10,500 $6,000 Cash Flow mk-$12,000) Project B: Annuity Flow Year 0 1 2 3 5 6 * Annuity** Cash Flow...(-$30,000) $8,500 $8,500 $8,500 $8,500 $8,500 $8,500 Calculate the following for each project. The discount rate (required return) is 8%. (c) What are the Equivalent Annual Annuities (EAA's) for Project A and Project B? Project A: Project B: (d) What are the Profitability Indexes (PI's) for Project A and Project B? Project A: Project B
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