Question
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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