In: Finance
Capital Budgeting Methods
Project S has a cost of $9,000 and is expected to produce benefits (cash flows) of $2,700 per year for 5 years. Project L costs $26,000 and is expected to produce cash flows of $7,100 per year for 5 years.
Calculate the two projects' NPVs, assuming a cost of capital of 10%. Do not round intermediate calculations. Round your answers to the nearest cent.
Project S: $ ???
Project L: $ ???
Which project would be selected, assuming they are mutually exclusive?
Based on the NPV values, [SELECT: Project S, Project L] would be selected.
Calculate the two projects' IRRs. Do not round intermediate calculations. Round your answers to two decimal places.
Project S: ??? %
Project L: ??? %.
Which project would be selected, assuming they are mutually exclusive?
Based on the IRR values, [SELECT: Project S, Project L] would be selected.
Calculate the two projects' MIRRs, assuming a cost of capital of 10%. Do not round intermediate calculations. Round your answers to two decimal places.
Project S: ??? %
Project L: ??? %
Which project would be selected, assuming they are mutually exclusive?
Based on the MIRR values, [SELECT: Project S, Project L] would be selected.
Calculate the two projects' PIs, assuming a cost of capital of 10%. Do not round intermediate calculations. Round your answers to three decimal places.
Project S: ???
Project L: ???
Which project would be selected, assuming they are mutually exclusive?
Based on the PI values, [SELECT: Project S, Project L] would be selected.
Which project should actually be selected?
[SELECT: Project S, Project L] should actually be selected.