Question
JKL Industries is evaluating two projects. Both projects require an initial investment of $200,000. The expected cash flows are as follows: Year Project R (USD)
- JKL Industries is evaluating two projects. Both projects require an initial investment of $200,000. The expected cash flows are as follows:
Year | Project R (USD) | Project S (USD) |
0 | (200,000) | (200,000) |
1 | 60,000 | 70,000 |
2 | 70,000 | 80,000 |
3 | 80,000 | 90,000 |
4 | 90,000 | 100,000 |
5 | 100,000 | 110,000 |
Requirements: a. Calculate the payback period for both projects. b. Compute the NPV for both projects assuming a discount rate of 10%. c. Based on the NPV, which project should JKL Industries select?
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Corporate Finance Principles and Practice
Authors: Denzil Watson, Antony Head
7th edition
1292103035, 978-1292103082, 1292103086, 978-1292103037
