The required return on these investments is 15 percent. What is the payback peri

Question

The required return on these investments is 15 percent.

What is the payback period for each project? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).)

What is the NPV for each project? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g.,32.16).)

What is the IRR for each project? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

What is the profitability index for each project? (Do not round intermediate calculations. Round your answers to 3 decimal places (e.g., 32.161).)

Consider the following two mutually exclusive projects:

Explanation / Answer

a)

Pay back period of A =  3.39
Pay back period of B= 2.05

NPV of A =  30786.88
NPV of B= 11821.31

IRR of A = 18.15%
IRR of B = 26.89%

Profitability index of A = NPV/ initial invetment + 1=  1.09
Profitability index of B = NPV/ initial invetment + 1=  1.22

e) Based on Payback period project  B is better
Based On NPV project A is better.
Based on IRR project B is better
Based on PI project B is better

Best of Luck. God Bless

Year 0 1 2 3 4 Cash Flow (A) -330000 44000 60000 65000 410000 Cumulative cash flows -330000 -286000 -226000 -161000 249000 Pay back Period = 3.39 Year before positive cumulative cash flows + Cumulative Cash flow of Year3 /Cash flow of 4 Year 0 1 2 3 4 Cash Flow (B) -53000 29000 23000 19000 17000 Cumulative cash flows -53000 -24000 -1000 18000 35000 Pay back Period = 2.05 Year before positive cumulative cash flows + Cumulative Cash flow of Year2 /Cash flow of 3

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