Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 $ 347,000 $ 49,500 1 48,000 24,300 2 68,000 22,300

Consider the following two mutually exclusive projects:

Year Cash Flow (A) Cash Flow (B)
0 $ 347,000 $ 49,500
1 48,000 24,300
2 68,000 22,300
3 68,000 19,800
4 443,000 14,900

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

a-1

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

a-2 If you apply the payback criterion, which investment will you choose?
Project A
Project B

b-1

What is the discounted payback period for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

Discounted payback period
Project A years
Project B years

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

c-1

What is the NPV for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

NPV
Project A $
Project B $

c-2 If you apply the NPV criterion, which investment will you choose?
Project A
Project B

d-1

What is the IRR for each project? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

IRR
Project A %
Project B %

d-2 If you apply the IRR criterion, which investment will you choose?
Project A
Project B

e-1

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-2 If you apply the profitability index criterion, which investment will you choose?
Project A
Project B
f. Based on your answers in (a) through (e), which project will you finally choose?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Handbook Of Financial Intermediation And Banking

Authors: Anjan V. Thakor, Arnoud Boot

1st Edition

0444515585, 978-0444515582

More Books

Students also viewed these Finance questions