JKL Corp is reviewing two investment projects, Project P and Project Q. Project P: Year Cash Flow
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Question:
JKL Corp is reviewing two investment projects, Project P and Project Q.
Project P:Year | Cash Flow ($) |
Year 0 | -60,000 |
Year 1 | 20,000 |
Year 2 | 25,000 |
Year 3 | 30,000 |
Year | Cash Flow ($) |
Year 0 | -70,000 |
Year 1 | 30,000 |
Year 2 | 20,000 |
Year 3 | 25,000 |
The discount rate for both projects is 9%.
Requirements: a) Calculate the payback period for each project. b) Determine which project should be selected if the company requires a payback period of 3 years. c) Calculate the IRR for each project. d) Decide which project should be accepted based on the IRR rule. e) Calculate the NPV for each project and recommend which project should be accepted based on NPV.
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