Question:
The Bingo corporation is in the process of determining which of the following two projects that they may invest in. The details are provided below:
PROJECT A B
cost of capital 12% 12%
Life of project 20 yrs 20 yrs
Annual cash flow 350,000 400,000
initial cost 1,250,000 1,400,000
Salvage value 250,000 110,000
Q1) What is the payback period?
Q2) What is the net present value of the two projects?
Q3) What is the internal rate of return of the two projects?
Q4) What is the profitability index?
Q5) Which of the two projects would you choose and which criteria would you use?