Question
The finance manager of Inc. A is evaluating two mutually exclusive projects with the following cash flows. Year Project X ($) Project Y ($) 0
The finance manager of Inc. A is evaluating two mutually exclusive projects with the following cash flows.
Year Project X ($) Project Y ($) 0 ----- (110,000) ------ (200,000) 1 --------45,000 ------ 50,000 2--------- 45,000 -------- 50,000 3 ----------30,000 --------- 50,000 4 -----------30,000 -------- 100,000 5 ----------20,000 --------- 55,000
Inc. As cost of capital is 10 percent and cut-off period used by the firm is 3 years. Advise the company which project should be undertaken using: (i) the payback method of investment appraisal
(ii) the discounted payback method of investment appraisal
(iii) Net Present Value
(iv) Profitability Index
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