Problem $9-17$ Comparing Investment Criteria $($LO$1,2,3,5,7)$

Consider the following two mutually exclusive projects:

Year Cash Flow $($A$)$ Cash Flow $($B$)$

$0$$ $350,000$$ $50,000$

$145,00024,000$

$265,00022,000$

$365,00019,500$

$4440,00014,600$

Whichever project you choose, if any, you require a $15\%$ return on your investment.

a$-1.$ What is the payback period for each project? $($Round the final answers to $2$ decimal places.$)$

Payback Period

Project A

years

Project B

years

a$-2.$ If you apply the payback criterion, which investment will you choose?

multiple choice $1$

Project A

Project B

b$-1.$ What is the discounted payback period for each project? $($Do not round intermediate calculations. Round the final answers to $2$ decimal places.$)$

Discounted Payback Period

Project A

years

Project B

years

b$-2.$ If you apply the discounted payback criterion, which investment will you choose?

multiple choice $2$

Project A

Project B

c$-1.$ What is the NPV for each project? $($Do not round intermediate calculations. Round the final answers to $2$ decimal places. Omit $ sign in your response.$)$

NPV

Project A $

Project B $

c$-2.$ If you apply the NPV criterion, which investment will you choose?

multiple choice $3$

Project A

Project B

d$-1.$ What is the IRR for each project? $($Round the final answers to $2$ decimal places.$)$

IRR

Project A

$\%$

Project B

$\%$

d$-2.$ If you apply the IRR criterion, which investment will you choose?

multiple choice $4$

Project A

Project B

e$-1.$ What is the profitability index for each project? $($Do not round intermediate calculation. Round the final answers to $3$ decimal places.$)$

Profitability Index

Project A

Project B

e$-2.$ If you apply the profitability index criterion, which investment will you choose?

multiple choice $5$

Project A

Project B

f$.$ Based on your answers in $($a$)$ through $($e$),$ which project will you finally choose?

multiple choice $6$

Project A

Project B