Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash
ID: 2748623 • Letter: C
Question
Consider the following two mutually exclusive projects:
Year Cash Flow (A) Cash Flow (B)
0 – $ 340,000 –$ 51,500
1 -55,000--25,000
2 75,000--23,000
3 75,000 - 20,500
4 450,000-15,600
Whichever project you choose, if any, you require a 16 percent return on your investment.
a-1 What is the payback period for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Payback period Project A years Project B years
a-2 If you apply the payback criterion, which investment will you choose? Project A Project B
b-1 What is the discounted payback period for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Discounted payback period Project A years? Project B years?
b-2 If you apply the discounted payback criterion, which investment will you choose? Project A Project B
c-1 What is the NPV for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) NPV ProjectA $ Project B
c-2 If you apply the NPV criterion, which investment will you choose? Project A Project B
d-1 What is the IRR for each project? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) IRR Project A % Project B %
d-2 If you apply the IRR criterion, which investment will you choose? Project A? Project B?
e-1 What is the profitability index for each project? (Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.) Profitability index Project A- Project B-
e-2 If you apply the profitability index criterion, which investment will you choose? Project B Project A
Explanation / Answer
Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash