Question
Consider the following cash flows of two mutually exclusive projects for Illinois Renewable Energy Company. Assume the discount rate for the company is 12 percent.
Consider the following cash flows of two mutually exclusive projects for Illinois Renewable Energy Company. Assume the discount rate for the company is 12 percent. Keep two decimal places when calculating.
| Year | Project A | Project B |
| 0 | -$2,000,000 | -$750,000 |
| 1 | $500,000 | $500,000 |
| 2 | $750,000 | $250,000 |
| 3 | $750,000 | $200,000 |
| 4 | $750,000 | $0 |
a) For each project, Calculate the payback period, the Net Present Value, and the IRR and indicate which project would be selected using that criteria.
b) If you can only invest in one of the projects, which is the best one to invest in? Briefly explain your reasoning.
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Mergers Acquisition And Other Restructuring Activities
Authors: Donald M. Depamphilis
6th Edition
123854857, 978-0123854858
