In: Finance
Consider the following two mutually exclusive projects: |
Year | Cash Flow (A) | Cash Flow (B) |
0 | –$201,178 | –$15,104 |
1 | 25,700 | 4,731 |
2 | 55,000 | 8,951 |
3 | 56,000 | 13,135 |
4 | 413,000 | 8,126 |
Whichever project you choose, if any, you require a 6 percent return on your investment. |
a. What is the payback period for Project A? |
b. What is the payback period for Project B? |
c. What is the discounted payback period for Project A? |
d. What is the discounted payback period for Project B? |
e. What is the NPV for Project A? |
f. What is the NPV for Project B ? |
g. What is the IRR for Project A? |
h. What is the IRR for Project B? |
i. What is the profitability index for Project A? |
j. What is the profitability index for Project B? |
Answers | |
a. What is the payback period for Project A? | 3.16 |
b. What is the payback period for Project B? | 2.11 |
c. What is the discounted payback period for Project A? | 3.25 |
d. What is the discounted payback period for Project B? | 2.24 |
e. What is the NPV for Project A? | 2,46,170.45 |
f. What is the NPV for Project B ? | 14,790.52 |
g. What is the IRR for Project A? | 34.00% |
h. What is the IRR for Project B? | 39.00% |
i. What is the profitability index for Project A? | 1.22 |
j. What is the profitability index for Project B? | 0.98 |