Question
GHI Manufacturing is considering an investment in Project Red or Project Blue . Both projects require an initial investment of $700,000. The projected cash inflows
GHI Manufacturing is considering an investment in Project Red or Project Blue. Both projects require an initial investment of $700,000. The projected cash inflows are:
Year | Project Red | Project Blue |
0 | -$700,000 | -$700,000 |
1 | $100,000 | $150,000 |
2 | $200,000 | $200,000 |
3 | $250,000 | $250,000 |
4 | $300,000 | $100,000 |
a. Determine the payback period for each project. b. Using a discount rate of 10%, calculate the NPV for both projects and indicate which project is more desirable.
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Valuation The Art and Science of Corporate Investment Decisions
Authors: Sheridan Titman, John D. Martin
3rd edition
133479528, 978-0133479522
