Gardial Fisheries is considering two mutually exclusive investments. The projects' expected net cash flows are as follows: 6 7 Time 0 1 8 9 10 11 12 13 14 15 16 17 2 3 4 5 6 7 Expected Net Cash Flows Project A Project B ($375) ($575) ($300) $190 ($200) $190 ($100) $190 $600 $190 $600 $190 $926 $190 ($200) $0 2 3 (100) 4 600 5 $600 6 $926 7 ($200) (200) 85 f. What is the regular payback period for these two projects? 86 87 Project A 88 Time period 0 1 89 Cash flow (375) (300) 90 Cumulative cash flow 91 Payback Year 92 93 Project B 94 Time period 0 1 95 Cash flow $575 $190 96 Cumulative cash flow 97 Payback Year 2 $190 3 $190 4 $190 5 $190 6 $190 7 $0 1 5 $600 6 $926 7 -$200 99 g. At a cost of capital of 12%, what is the discounted payback period for these two projects? 100 101 WACC = 12% 102 103 Project A 104 Time period 0 2 3 4 105 Cash flow -$375 -$300 -$200 $100 $600 106 Disc. cash flow 107 Disc. cum. cash flow 108 Payback Year 109 110 Project B 111 Time period 0 1 2 3 4 112 Cash flow $575 $190 $190 $190 $190 113 Disc. cash flow 114 Disc. cum. cash flow 115 Payback Year 5 $190 6 $190 7 $0 118 h. What is the profitability index for each project if the cost of capital is 12%? 119 120 PV of future cash flows for A: 121 Pl of A: 122 123 PV of future cash flows for B: 124 Pl of B