Question
Consider the following mutually exclusive projects with the given cash flows: Projects C0C_0C0 C1C_1C1 C2C_2C2 C3C_3C3 C4C_4C4 A -12,000 4,000 6,000 8,000 10,000 B -15,000
Consider the following mutually exclusive projects with the given cash flows:
Projects | C0C_0C0 | C1C_1C1 | C2C_2C2 | C3C_3C3 | C4C_4C4 |
A | -12,000 | 4,000 | 6,000 | 8,000 | 10,000 |
B | -15,000 | 5,000 | 7,000 | 8,000 | 9,000 |
C | -9,000 | 3,000 | 5,000 | 7,000 | 8,000 |
D | -6,000 | 2,000 | 4,000 | 6,000 | 7,000 |
Required:
- Calculate the payback period for each project.
- If the standard payback period is 3 years, which project will you select? Will your answer differ if the standard payback period is 4 years?
- Compute the NPV for each project at a discount rate of 8%. Which project should be selected based on the NPV criterion?
- Determine the IRR for each project.
- Rank the projects based on their profitability index. Consider the following mutually exclusive projects with the given cash flows:
- Calculate the payback period for each project.
- If the standard payback period is 3 years, which project will you select? Will your answer differ if the standard payback period is 4 years?
- Compute the NPV for each project at a discount rate of 8%. Which project should be selected based on the NPV criterion?
- Determine the IRR for each project.
- Rank the projects based on their profitability index.
Projects | C0C_0C0 | C1C_1C1 | C2C_2C2 | C3C_3C3 | C4C_4C4 |
A | -12,000 | 4,000 | 6,000 | 8,000 | 10,000 |
B | -15,000 | 5,000 | 7,000 | 8,000 | 9,000 |
C | -9,000 | 3,000 | 5,000 | 7,000 | 8,000 |
D | -6,000 | 2,000 | 4,000 | 6,000 | 7,000 |
Required:
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Fundamentals of Cost Accounting
Authors: William Lanen, Shannon Anderson, Michael Maher
5th edition
978-1259565403
