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    Measures of Project Evaluation

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    The Bingo Corporation is in the process of determining which of the following two projects they should invest in the details are below

    PROJECT A B

    COST OF CAPITAL 12% 12%
    LIFE OF PROJECT 20 YEARS 20 YEARS
    ANNUAL CASH FLOW $350,000 $400,000
    INITIAL COST $1,250,000 $1,400,000
    SALVAGE VALUE $250,000 $110,000

    QUESTION

    A. What is the payback period
    B. What is the NPV of the two projects
    C. What is the IRR of the two projects
    D. What is the profitability index
    E. Which of the two projects will you choose and which criteria would you use

    © BrainMass Inc. brainmass.com October 9, 2019, 11:43 pm ad1c9bdddf
    https://brainmass.com/business/net-present-value/measures-of-project-evaluation-265723

    Solution Summary

    Using an Excel spreadsheet, this solution illustrates the computation of the net present value, internal rate of return, and payback period on alternative projects.

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