Comparison of Investment based on Payback, NPV, IRR and Profitability Index
Consider the following two mutually exclusive projects:
|
Year
|
Cash flow (A)
|
Cash flow (B)
|
|
0
|
-$262,782
|
-$27,554
|
|
1
|
27,300
|
10,410
|
|
2
|
51,000
|
11,010
|
|
3
|
51,000
|
10,196
|
|
4
|
393,000
|
10,971
|
Whichever project you choose, if any, you require a 15 percent return on your investment.
Required:
(a) The payback period for project A and B is _____ and _____ years, respectively. (Round your answers to 2 decimal places, e.g. 32.16)
(b) The discounted payback period for project A and B is _____ and _____ years, respectively. (Round your answers to 2 decimal places, e.g. 32.16)
(c) The NPV for project A and B is $_____ and $_____, respectively. (Round your answers to 2 decimal places, e.g. 32.16)
(d) The IRR for project 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 project 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 _____.