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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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.
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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 ...
Purchase this Solution
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