Consider the following two mutually exclusive projects: What is the payback peri
ID: 2645082 • Letter: C
Question
Consider the following two mutually exclusive projects:
What is the payback period for each project? (A & B) Round final answers to 2 decimal places.
What is the dicounted payback period for each project? (A & B) Round final answers to 2 decimal places.
What is the NPV for each project? (A & B)
What is the IRR for each project? (A&B)
What is the profitability index for each project? (A&B)
Year Cash Flow (A) Cash Flow (B) 0 -347,000 -49,500 1 48,000 24,300 2 68,000 22,300 3 68,000 19,800 4 443,000 14,900Explanation / Answer
Payback period.
A = 3.44 years approx
B = 2.18 years approx
Discounted payback period
Calcualtion of NPV.
Calculation of IRR.
Calculation of PI.
A = 453499 / 347000 = 1.31
B = 65573 / 49500 = 1.32
Note: while calcuating PV factor is considered at 10%. If the rate is different tyen factor will change accordingly.
Cash Flow A Year Cash Outflow PV Factor @10% Discounted cash flow Cumulative discounted cash flow 0 $ (3,47,000.00) 1.00 $ (3,47,000.00) $ (3,47,000.00) 1 $ 48,000.00 0.91 $ 43,636.36 $ (3,03,363.64) 2 $ 68,000.00 0.83 $ 56,198.35 $ (2,47,165.29) 3 $ 68,000.00 0.75 $ 51,089.41 $ (1,96,075.88) 4 $ 4,43,000.00 0.68 $ 3,02,574.96 $ 1,06,499.08 =3+(-196075.88)/302574.96 3.65 years Cash Flow B Year Cash Outflow PV Factor @10% Discounted cash flow Cumulative discounted cash flow 0 $ (49,500.00) 1.00 $ (49,500.00) $ (49,500.00) 1 $ 24,300.00 0.91 $ 22,090.91 $ (27,409.09) 2 $ 22,300.00 0.83 $ 18,429.75 $ (8,979.34) 3 $ 19,800.00 0.75 $ 14,876.03 $ 5,896.69 4 $ 14,900.00 0.68 $ 10,176.90 $ 16,073.59 =2+(-8979.34)/14876.03 2.60 years