Question
TUV International is evaluating an investment in either Project Gold or Project Silver . Both projects require an initial investment of $1,500,000. The cash inflows
TUV International is evaluating an investment in either Project Gold or Project Silver. Both projects require an initial investment of $1,500,000. The cash inflows are:
Year | Project Gold | Project Silver |
0 | -$1,500,000 | -$1,500,000 |
1 | $400,000 | $300,000 |
2 | $450,000 | $350,000 |
3 | $500,000 | $400,000 |
4 | $550,000 | $450,000 |
a. Calculate the payback period for both projects. b. If the required rate of return is 8%, calculate the NPV for both projects and suggest which project should be accepted.
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Fundamentals of Financial Management
Authors: Eugene F. Brigham, Joel F. Houston
12th edition
978-0324597714, 324597711, 324597703, 978-8131518571, 8131518574, 978-0324597707
