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The firm is evaluating projects S and T, each needing a $100,000 initial investment. The projected cash inflows are: Project S: Year 1: $45,000 Year
The firm is evaluating projects S and T, each needing a $100,000 initial investment. The projected cash inflows are:
Project S:
- Year 1: $45,000
- Year 2: $35,000
- Year 3: $25,000
- Year 4: $20,000
Project T:
- Year 1: $30,000
- Year 2: $35,000
- Year 3: $40,000
- Year 4: $25,000
Requirements: a. Compute the NPV for each project using a discount rate of 13%. b. Determine the IRR for each project. c. Compute the profitability index for both projects. d. Analyze which project is more viable based on the NPV criterion.
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