Question
(Net present value, profitability index, and internal rate of return calculations) You are considering two independent projects, Project A and Project B. The initial cash
(Net present value, profitability index, and internal rate of return calculations) You are considering two independent projects, Project A and Project B. The initial cash outlay associated with Project A is $55,000 and the initial cash outlay associated with Project B is $64,000. The discount rate on both projects is 9.7 percent. The expected annual cash flows from each project are as follows:
Year | Project A | Project B |
---|---|---|
0 | $(55,000) | $(64,000) |
1 | 12,000 | 13,000 |
2 | 12,000 | 13,000 |
3 | 12,000 | 13,000 |
4 | 12,000 | 13,000 |
5 | 12,000 | 13,000 |
6 | 12,000 | 13,000 |
Calculate the NPV, PI, and IRR for each project and indicate if the project should be accepted or not. (ROUND ANSWERS TO NEAREST CENT or if percentage to two decimal places)
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