Question
Your division is considering two projects. The required rate of return for both projects is 12%. Below are the cash flows of both the projects:
Your division is considering two projects. The required rate of return for both projects is 12%. Below are the cash flows of both the projects: (Note: show all computations)
| Projects | Initial investment | Year 1 | Year 2 | Year 3 | Year 4 |
| A | -$50 | $7 | $12 | $17 | $25 |
| B | -$50 | $20 | $18 | $12 | $11 |
- Calculate the Payback period and discounted payback period. Why are they different?
- Calculate the NPV for both the projects
- Which projects should be accepted on the basis of IRR?
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Multinational Business Finance
Authors: David K. Eiteman, Arthur I. Stonehill, Michael H. Moffett
12th Edition
0136096689, 978-0136096689
