Question
Gamma Group is evaluating two projects. The initial investment and cash flows are as follows: Year Cash Flows (Project E) Cash Flows (Project F) Initial
Gamma Group is evaluating two projects. The initial investment and cash flows are as follows:
Year | Cash Flows (Project E) | Cash Flows (Project F) |
Initial Investment | (150,000) | (150,000) |
1 | 40,000 | 30,000 |
2 | 50,000 | 40,000 |
3 | 60,000 | 50,000 |
4 | 70,000 | 60,000 |
Requirements: a. Compute the payback period for both projects. b. Calculate the NPV for each project if the discount rate is 5%. c. Using the IRR, which project is more favorable for Gamma Group?
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Fundamentals of Financial Management
Authors: Eugene F. Brigham, Joel F. Houston
15th edition
1337671002, 978-1337395250
