Question
TechWave is evaluating two projects with the following net cash flows. The firm's discount rate is 13%. (PV of $1 = 0.885, PVIFA of $1
TechWave is evaluating two projects with the following net cash flows. The firm's discount rate is 13%. (PV of $1 = 0.885, PVIFA of $1 = 3.517, FV of $1 = 1.130, FVA of $1 = 4.869)
Year | Project K Cash Flow | Project L Cash Flow |
0 | $(950,000) | $(850,000) |
1 | $210,000 | $170,000 |
2 | $260,000 | $220,000 |
3 | $310,000 | $270,000 |
4 | $360,000 | $300,000 |
5 | $400,000 | $340,000 |
a. Compute the payback period for both projects. Which project is more desirable based on the payback period?
b. Determine the net present value for each project. Which project is more favorable based on the net present value?
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