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Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 $ 400,000 $ 65,000 1 60,000 29,000 2 80,000 27,000

Consider the following two mutually exclusive projects:

Year Cash Flow (A) Cash Flow (B)
0 $ 400,000 $ 65,000
1 60,000 29,000
2 80,000 27,000
3 70,000 24,500
4 445,000 19,600

Whichever project you choose, if any, you require a 15% return on your investment.

a-1. What is the payback period for each project? (Round the final answers to 2 decimal places.)

Payback Period
Project A years
Project B years

a-2. If you apply the payback criterion, which investment will you choose?

multiple choice 1

  • Project A

  • Project B

b-1. What is the discounted payback period for each project? (Do not round intermediate calculations. Round the final answers to 2 decimal places.)

Discounted Payback Period
Project A years
Project B years

b-2. If you apply the discounted payback criterion, which investment will you choose?

multiple choice 2

  • Project A

  • Project B

c-1. What is the NPV for each project? (Do not round intermediate calculations. Round the final answers to 2 decimal places. Omit $ sign in your response.)

NPV
Project A $
Project B $

c-2. If you apply the NPV criterion, which investment will you choose?

multiple choice 3

  • Project A

  • Project B

d-1. What is the IRR for each project? (Round the final answers to 2 decimal places.)

IRR
Project A %
Project B %

d-2. If you apply the IRR criterion, which investment will you choose?

multiple choice 4

  • Project A

  • Project B

e-1. What is the profitability index for each project? (Do not round intermediate calculation. Round the final answers to 3 decimal places.)

Profitability Index
Project A
Project B

e-2. If you apply the profitability index criterion, which investment will you choose?

multiple choice 5

  • Project A

  • Project B

f. Based on your answers in (a) through (e), which project will you finally choose

multiple choice 6

  • Project A

  • Project B

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