Question
Kaleb Konstruction, Inc., has the following mutually exclusive projects, A and B, available. The estimated life for both projects are four year. The estimated initial
Kaleb Konstruction, Inc., has the following mutually exclusive projects, A and B, available. The estimated life for both projects are four year. The estimated initial investment costs and the cash flows from assets produced by each project over the project life are presented in the following table. The unit of the numbers in the table is $ in millions. The required return for both projects is 14 percent.
Year | Project A | Project B |
0 | -125,000 | -200,000 |
1 | 52,550 | 42,500 |
2 | 45,000 | 42,500 |
3 | 45,000 | 110,500 |
4 | 45,000 | 116,500 |
What is the Profitability Index for each project?
(No unit for the profitability index.)
Profitability Index | |
Project A |
|
Project B |
|
Reqirement
According to your analysis, which project, if any, should the company accept?
(Fill in this cell with "1" or "2". If your choice is Project A, then fill in with "1". If your choice is Project B, then fill in with "2".)
Project
Reqirement
At what discount rate do these two projects have the same net present value?
Discount Rate %
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