Comparing Investment Criteria
Consider the following two mutually exclusive projects:
Year Cash Flow A Cash Flow B
|
0
|
-$257,851
|
-$31,827
|
|
1
|
25,500
|
11,483
|
|
2
|
57,000
|
12,954
|
|
3
|
51,000
|
11,412
|
|
4
|
405,000
|
9,674
|
Whichever project you choose, if any, you require a 15 percent return on your investment.
Required:
(a) The payback period for Projects A and B is and years, respectively. (Round your answers to 2 decimal places, e.g. 32.16.)
(b) The discounted payback period for Projects A and B is and years, respectively. (Round your answers to 2 decimal places, e.g. 32.16.)
(c) The NPV for Projects A and B is $ and $ , respectively. (Round your answers to 2 decimal places, e.g. 32.16.)
(d) The IRR for Projects A and B is percent and percent, respectively. (Do not include the percent sign (%). Round your answers to 2 decimal places, e.g. 32.16.)
(e) The profitability index for Projects A and B is and , respectively. (Round your answers to 3 decimal places, e.g. 32.161.)
(f) Based on your answers in (a) through (e), you will finally choose Project