Question
Digital Solutions Inc. is analyzing two projects with the following net cash flows. The company's required rate of return on investments is 9%. (PV of
Digital Solutions Inc. is analyzing two projects with the following net cash flows. The company's required rate of return on investments is 9%. (PV of $1, FV of $1, PVA of $1, and FVA of $1).
Year | Project DigiA | Project DigiB |
0 | $(400,000) | $(450,000) |
1 | $120,000 | $110,000 |
2 | $160,000 | $150,000 |
3 | $200,000 | $190,000 |
4 | $240,000 | $230,000 |
a. Calculate the payback period for each project. Which project is preferred based on the payback period?
b. Calculate the net present value for each project. Which project is preferred based on the net present value?
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Intermediate Financial Management
Authors: Eugene F. Brigham, Phillip R. Daves
12th edition
1285850033, 978-1305480698, 1305480694, 978-0357688236, 978-1285850030
