Question
Farrah Corporation is considering two projects (see below). For your analysis, assume these projects are mutually exclusive with a required rate of return of 12%.
Farrah Corporation is considering two projects (see below). For your analysis, assume these projects are mutually exclusive with a required rate of return of 12%.
Project 1
Initial investment
$185,000
Cash inflow Year 1
$230,000
Project 2
Initial Inv
$1,100,000
Cash Inflow year 1
$1,450,000
Compute the following for each project:
NPV (net present value)
PI (profitability index)
IRR (internal rate of return)
Which project should be selected? Why?
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Cases in Financial Reporting
Authors: Michael J. Sandretto
1st edition
538476796, 978-0538476799
