Question
Given the cash flows for two projects, S and T. Project S requires an initial investment of $80,000, and Project T requires an initial investment
Given the cash flows for two projects, S and T. Project S requires an initial investment of $80,000, and Project T requires an initial investment of $75,000.
Year | Project S | Project T |
1 | $25,000 | $22,000 |
2 | $27,000 | $24,000 |
3 | $29,000 | $26,000 |
4 | $31,000 | $28,000 |
5 | $33,000 | $30,000 |
(a) Calculate the NPV for each project using a discount rate of 5%.
(b) State your accept/reject decision.
(c) What would be your accept/reject decision if they were independent projects?
(d) Calculate the IRR for each project.
(e) Which project would you recommend if only one can be selected?
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Cornerstones Of Managerial Accounting
Authors: Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
4th Edition
978-0538473460, 0538473460
