FIN220

QUESTION 12 Ithmaar Holding B.S.C. (Bahrain Bourse, #ITHMR$) is considering two independent projects that have the following cash flows. Year Project A Project B $ -22,000 $-55,000 17,000 15,000 2 6,000 25,000 3 7,000 35,000 Discount rate 9% 10% a) Calculate the Net Present Value (NPV) methods and explain which project is better. (1.5 marks) b) Calculate the Internal Rate of Return (IRR) of the two projects and explain which project is better. (1.5 marks) c) Calculate the Profitability Index (PI) of the two projects and explain which project is better. (1.5 mark) Note: You are allowed to use Financial Calculator 0 1 QUESTION 12 Ithmaar Holding B.S.C. (Bahrain Bourse, #ITHMR$) is considering two independent projects that have the following cash flows. Year Project A Project B $ -22,000 $-55,000 17,000 15,000 2 6,000 25,000 3 7,000 35,000 Discount rate 9% 10% a) Calculate the Net Present Value (NPV) methods and explain which project is better. (1.5 marks) b) Calculate the Internal Rate of Return (IRR) of the two projects and explain which project is better. (1.5 marks) c) Calculate the Profitability Index (PI) of the two projects and explain which project is better. (1.5 mark) Note: You are allowed to use Financial Calculator 0 1