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Two projects have the following cash flows: Period Project A Project B 0 -10,000 -12,000 1 5,000 1,000 2 5,000 1,000 3 5,000 3,000 4
Two projects have the following cash flows:
| Period | Project A | Project B |
| 0 | -10,000 | -12,000 |
| 1 | 5,000 | 1,000 |
| 2 | 5,000 | 1,000 |
| 3 | 5,000 | 3,000 |
| 4 | 5,000 | 4,000 |
| 5 | 5,000 | 7,000 |
1. Calculate the payback period for each project.
2. Calculate the NPV of each project is the discount rate is 10%.
3. Calculate the profitability index of each project.
4. Calculate the IRR of each project.
5. With the help of a diagram, explain the meaning of the crossover rate for project A and project B.
6. If these projects were independent; which project/projects would you accept? 7. If these projects were mutually exclusive; which project/projects would you accept?
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