Question

Consider the following two mutually exclusive projects:

Year	Cash Flow (A)	Cash Flow (B)
0	–$65,000	–$250,000
1	35,000	25,000
2	27,000	70,000
3	25,000	70,000
4	41,000	320,000

The required return on these investments is 10 percent.

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

	Payback period
Project A	years
Project B	years

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

	Net present value
Project A	$
Project B	$

(c)	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).)

	Internal rate of return
Project A	%
Project B	%

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

	Profitability index
Project A
Project B

(e)	Based only on the projects' NPV and IRR, which project should you finally choose?
	(Click to select)Project A Project B Cannot Be Determined

Answer 1