Question
Your division is considering projects S and L. Project S and L require up-front expenditures of $2,050 and $4,300, respectively. You estimate that the cost
Your division is considering projects S and L. Project S and L require up-front expenditures of $2,050 and $4,300, respectively. You estimate that the cost of capital is 10.25% and that the investments will produce the following after-tax cash flows:
| Year | Project-S | Project-L |
| 1 | $750 | $1,500 |
| 2 | $760 | $1,518 |
| 3 | $770 | $1,536 |
| 4 | $780 | $1,554 |
What is the regular payback period for project L?
What is the discounted payback period for project S?
What is the IRR for project L?
What is the NPV for project S?
What is the profitability index for project L?
If both projects (S and L) are mutually exclusive, based on IRR, which project or projects should the firm undertake?
What is the crossover rate?
What is the modified IRR (MIRR) of project S?
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Behavioral Finance And Wealth Management
Authors: Michael M. Pompian
2nd Edition
1118014324, 978-1118014325
