Question
Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 $ 424,000 $ 39,500 1 44,500 20,300 2 61,500 13,400
Consider the following two mutually exclusive projects:
Year | Cash Flow (A) | Cash Flow (B) | ||
0 | $ | 424,000 | $ | 39,500 |
1 | 44,500 | 20,300 | ||
2 | 61,500 | 13,400 | ||
3 | 78,500 | 18,100 | ||
4 | 539,000 | 14,900 | ||
The required return on these investments is 11 percent.
a. What is the payback period for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
Payback period | ||
Project A | years | |
Project B | years | |
b. What is the NPV for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
Net present value | ||
Project A | $ | |
Project B | $ | |
c. What is the IRR for each project? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
Internal rate of return | ||
Project A | $ | |
Project B | $ | |
d. What is the profitability index for each project? (Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.)
Profitability index | ||
Project A | ||
Project B | ||
e. Based on your answers in (a) through (d), which project will you finally choose?
(Click to select)Project AProject B
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