Question
Global Ventures Inc. is considering investing in Project Horizon or Project Zenith . Each project requires an initial investment of $2,000,000. The cash inflows are:
Global Ventures Inc. is considering investing in Project Horizon or Project Zenith. Each project requires an initial investment of $2,000,000. The cash inflows are:
Year | Project Horizon | Project Zenith |
0 | -$2,000,000 | -$2,000,000 |
1 | $500,000 | $600,000 |
2 | $600,000 | $500,000 |
3 | $700,000 | $400,000 |
4 | $800,000 | $300,000 |
a. Compute the payback period for both projects. b. If the discount rate is 14%, calculate the NPV for both projects and recommend which project should be selected.
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Principles of Managerial Finance
Authors: Lawrence J. Gitman, Chad J. Zutter, Wajeeh Elali, Amer Al Roubaix
Arab World Edition
1408271583, 978-1408271582
