Question
Evaluate the following cash flows for projects P and Q: Year Project P Project Q 0 -10,000 -12,000 1 3,000 4,000 2 3,000 4,000 3
Evaluate the following cash flows for projects P and Q:
Year | Project P | Project Q |
0 | -₹10,000 | -₹12,000 |
1 | ₹3,000 | ₹4,000 |
2 | ₹3,000 | ₹4,000 |
3 | ₹3,000 | ₹4,000 |
4 | ₹3,000 | ₹4,000 |
Requirements:
- Calculate the Payback Period for both projects.
- Determine the Discounted Payback Period at 8% cost of capital.
- Compute the NPV at 8% for each project.
- Find the IRR for each project.
- Based on the Payback Period, NPV, and IRR, which project should be recommended?
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Financial Theory and Corporate Policy
Authors: Thomas E. Copeland, J. Fred Weston, Kuldeep Shastri
4th edition
321127218, 978-0321179548, 321179544, 978-0321127211
