Question

consider the following two mutually exclusive projects:
YEAR	cash flow(A)		Cash flow(B)
0	($229,719)		($14,555)
1	27,600		4,159
2	55,000		8,052
3	53,000		13,896
4	417,000		8,291
whichever project you choose, if any, you require a 6% return on your investment
A)What is the payback period for project A?
B) What is the discounted payback period for project A
c)what is the NPV for project A
D)what is IRRfor project A
(E) WHAT IS THE PROFITABILITY INDEX FOR PROJECT A?
(f) WHAT IS THE CROSSOVER rate for ProjectA and Project B

Answer 1

A
Project A
Year	Cash flow stream	Cumulative cash flow
0	-229719	-229719
1	27600	-202119
2	55000	-147119
3	53000	-94119
4	417000	322881
Payback period is the time by which undiscounted cashflow cover the intial investment outlay
this is happening between year 3 and 4
therefore by interpolation payback period = 3 + (0-(-94119))/(322881-(-94119))
3.23 Years
B
Project A			Discount rate=	0.06
Year	Cash flow stream	Cumulative cash flow	Discounting factor	Discounted CF	Cumulative cash flow
0	-229719	-229719	1	-229719	-229719
1	27600	-202119	1.06	26037.74	-202119
2	55000	-147119	1.1236	48949.8	-147119
3	53000	-94119	1.191016	44499.82	-94119
4	417000	322881	1.262477	330303.1	322881
Discounted payback period is the time by which discounted cashflow cover the intial investment outlay
this is happening between year 3 and 4
therefore by interpolation payback period = 3 + (0-(-110231.64))/(220071.42-(-110231.64))
3.33 Years
Where
Discounting factor =(1 + discount rate)^(corresponding year)
Discounted Cashflow=Cash flow stream/discounting factor
C
Project A
Discount rate	0.06
Year	0	1	2	3	4
Cash flow stream	-229719	27600	55000	53000	417000
Discounting factor	1	1.06	1.1236	1.191016	1.262477
Discounted cash flows project	-229719	26037.74	48949.8	44499.82	330303.06
NPV = Sum of discounted cash flows
NPV Project A =	220071.42
Where
Discounting factor =	(1 + discount rate)^(Corresponding period in years)
Discounted Cashflow=	Cash flow stream/discounting factor
D
Project A
IRR is the rate at which NPV =0
IRR	0.289999782
Year	0	1	2	3	4
Cash flow stream	-229719	27600	55000	53000	417000
Discounting factor	1	1.29	1.664099	2.146688	2.7692269
Discounted cash flows project	-229719	21395.35	33050.91	24689.2	150583.54
NPV = Sum of discounted cash flows
NPV Project A =	0.00010639
Where
Discounting factor =	(1 + IRR)^(Corresponding period in years)
Discounted Cashflow=	Cash flow stream/discounting factor
IRR=	29%

Please ask remaining parts seperately