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Consider the following two mutually exclusive projects. Whichever project you choose, if any, you require a return of 11% on your investment. Year Project X
Consider the following two mutually exclusive projects. Whichever project you choose, if any, you require a return of 11% on your investment.
Year | Project X | Project Y |
0 | -$291,000 | -$41,600 |
1 | $37,000 | $20,000 |
2 | $55,000 | $17,600 |
3 | $55,000 | $17,200 |
4 | $366,000 | $14,000 |
- If you apply the payback criterion, which investment will you choose? Why?
- If you apply the discounted payback criterion, which investment will you choose? Why?
- If you apply the NPV criterion, which investment will you choose? Why?
- If you apply the IRR criterion, which investment will you choose? Why?
- If you apply the profitability index criterion, which investment will you choose? Why?
- Based on your above answers, which project will you finally choose? Why?
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