Problem:

Mobil Co. has hired a consultant to propose a way to increase the companys revenues. The consultant has evaluated two mutually exclusive projects with the following information provided for each project:

Project Turtle Project Snake

Capital investment $790,000 $440,000

Net Annual cash flows 140,000 80,000

Estimated useful life 10 years 10 years

Mobil Co. uses a discount rate of 9% to evaluate both projects.

(a) Calculate the net present value of both projects.

(b) Calculate the profitability index for each project.

(c) Which project should Mobil accept?

(d) Pay-back period for both