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