Question
Consider the information in the attached table regarding two mutually exclusive projects and answer the following questions: Whichever project you choose, if any, you require
Consider the information in the attached table regarding two mutually exclusive projects and answer the following questions:
Whichever project you choose, if any, you require a 15% return on your investment.
a. If you apply the payback criterion, which investment will you choose? Why?
b. If you apply the discounted payback criterion, which investment will you choose? Why?
c. If you apply the NPV criterion, which investment will you choose? Why?
d. If you apply the IRR criterion, which investment will you choose? Why?
e. If you apply the profitability index criterion, which investment will you choose? Why?
f. Based on your answers in (a) through (e), which project will you finally choose? Why?
Year Cash Flow (A) Cash Flow (B) 0 $ (350,000) $ (50,000) 1 $ 45,000 $ 24,000 2 $ 65,000 $ 22,000 3 $ 65,000 $ 19,500 4 $ 440,000 $ 14,600
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Calculus For Business, Economics And The Social And Life Sciences
Authors: Laurence Hoffmann, Gerald Bradley, David Sobecki, Michael Price
11th Brief Edition
978-0073532387, 007353238X
