Question
Cash flows from two investment opportunities are given below. Year CFA CFB 0 -$1,000 -$1,000 1 +$100+$800 2 +$200+$300 3 +$400+$300 4 +$700+$200 5 +$800+$200
Cash flows from two investment opportunities are given below.
Year CFA CFB
0 -$1,000 -$1,000
1 +$100+$800
2 +$200+$300
3 +$400+$300
4 +$700+$200
5 +$800+$200
If the cost of capital is 10%, what is the NPV, IRR and Payback period of each investment? What is the appropriate investment choice if (i) the investments are mutually exclusive, or (ii) the investments are independent? Please justify your answer.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
To calculate the NPV IRR and payback period for each investment opportunity we need to use the given cash flows and the cost of capital discount rate ...
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Step: 2
Step: 3
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Contemporary Financial Management
Authors: James R Mcguigan, R Charles Moyer, William J Kretlow
10th Edition
978-0324289114, 0324289111
