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Problem 9-17 Comparing Investment Criteria [LO1, 2, 3, 5, 7] Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0
Problem 9-17 Comparing Investment Criteria [LO1, 2, 3, 5, 7]
Consider the following two mutually exclusive projects: |
Year | Cash Flow (A) | Cash Flow (B) |
---|---|---|
0 | $ 359,000 | $ 45,500 |
1 | 36,000 | 23,100 |
2 | 56,000 | 21,100 |
3 | 56,000 | 18,600 |
4 | 431,000 | 13,700 |
Whichever project you choose, if any, you require a return of 14 percent on your investment. |
a-1. | What is the payback period for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) |
a-2. | If you apply the payback criterion, which investment will you choose? |
multiple choice 1 Project A Project B Correct |
b-1. | What is the discountedpayback period for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) |
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 and round your answers to 2 decimal places, e.g., 32.16.) |
c-2. | If you apply the NPV criterion, which investment will you choose? |
multiple choice 3 Project B Project A |
d-1. | What is the IRR for each project? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) |
d-2. | If you apply the IRR criterion, which investment will you choose? |
multiple choice 4 Project A Project B Correct |
e-1. | What is the profitability index for each project? (Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.) |
e-2. | If you apply the profitability index criterion, which investment will you choose? |
multiple choice 5 Project A Project B Correct |
f. | Based on your answers in (a) through (e), which project will you finally choose? |
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