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Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 $420,000 $37,500 1 46,500 19,900 2 59,500 13,800 3 76,500

Consider the following two mutually exclusive projects:

Year Cash Flow (A) Cash Flow (B)
0 $420,000 $37,500
1 46,500 19,900
2 59,500 13,800
3 76,500 16,100
4 535,000 12,900

The required return on these investments is 10 percent.

Required:
(a)

What is the payback period for each project? (Do not round intermediate calculations. 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. 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. Enter your answers as a percentage 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. 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 A or Project B

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