Question
Consider the following project cash flows and answer the questions below. Project Year 0 Year 1 Year 2 Year 3 A -35,000 18,000 18,000 12,000
Consider the following project cash flows and answer the questions below.
| Project | Year 0 | Year 1 | Year 2 | Year 3 |
| A | -35,000 | 18,000 | 18,000 | 12,000 |
| B | -25,000 | 20,000 | 40,000 |
a) Using Payback analysis, which project is preferred?
b) Given a cost of captial of 13%, which project is preferred?
c) If the cost of captial is 8.5%, does that change your assessment?
d) Compute IRR for each project.
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Financial Management Principles And Practice
Authors: Timothy Gallagher
6th Edition
1930789157, 978-1930789159
