Question
project A project B initial investment (225,000) (275,000) project A project B expected cash flow by years cumulative net cash flow 1 50,000 62,000 (175,000)
project A project B initial investment (225,000) (275,000) project A project B expected cash flow by years cumulative net cash flow 1 50,000 62,000 (175,000) (213,000) 2 56,000 50,000 (119,000) (163,000) 3 80,295 96,000 (38,705) (67,000) 4 90,400 92,000 51,695 25,000 5 55,000 99,000 106,695 124,000 payback year 3.57 3.27 discount rate 10% depreciation rate per year 7% stright line, with zero salvage value profitability index for each project calculate: 1. Payback period 2. Accounting rate of return (assume the only diffeence between cash flow and nt income is depreciaiton expense) 3. Net present value 4. IRR 5. Profitability index 6. if the company has to choose one project whichh one should be chosen? Explain your asnwer
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