Explore BrainMass

Explore BrainMass

    Capital budgeting

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    11. Caledonia is considering two additional mutually exclusive projects. The cash flows associated with these projects are as follows:

    YEAR PROJECT A PROJECT B
    0 $100,000 $100,000
    1 32,000 0
    2 32,000 0
    3 32,000 0
    4 32,000 0
    5 32,000 $200,000

    The required rate of return on these projects is 11 percent.

    a. What is each project's payback period?
    Project A
    Project B

    b. What is each project's net present value?
    Project A
    Project B

    c. What is each project's internal rate of return?
    Project A
    Project B

    d. What has caused the ranking conflict?
    Project A
    Project B

    e. Which project should be accepted? Why?
    Project A
    Project B

    © BrainMass Inc. brainmass.com June 4, 2020, 12:37 am ad1c9bdddf
    https://brainmass.com/business/capital-budgeting/capital-budgeting-349481

    Solution Summary

    The solution explains how to calculate Payback, NPV, IRR for the projects and make the accept/reject decision

    $2.19

    ADVERTISEMENT