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    Comparing Investment Criteria

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    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

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    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.)

    Payback period is defined as the expected number of years ...

    Solution Summary

    This solution is comprised of a detailed explanation to calculate the NPV, IRR, payback, profitability index, and discounted payback for two mutually exclusive projects.

    $2.19

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