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Year Cash Flow (A) Cash Flow B) 0 -$415,000 -$35,000 1 49,000 19,400 2 57,000 14,300 3 74,000 13,6000 4 530,000 10,4000 Whichever project you
| Year | Cash Flow (A) | Cash Flow B) |
| 0 | -$415,000 | -$35,000 |
| 1 | 49,000 | 19,400 |
| 2 | 57,000 | 14,300 |
| 3 | 74,000 | 13,6000 |
| 4 | 530,000 | 10,4000 |
Whichever project you choose, if any, you require a 13 percent return on your investment.
- If you apply the payback criterion, which investment will you choose? Why?
- If you apply the NPV criterion, which investment will you choose? Why?
- If you apply the IRR criterion, which investment will you choose? Why?
- If you apply the profitability index criterion, which investment will you choose? Why?
- Based on your answers in (a) through (d), which project will you finally choose? Why?
. Consider the following two mutual exclusive projects:
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