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In: Finance

For the following projects, compute the net present value, internal rate of return, and the profitability...

For the following projects, compute the net present value, internal rate of return, and the profitability index. Assume the required rate of return is 17% compounded annually.

Project	Initial Investment	Cashflow at time 1	Cashflow at time 2
A	116,000	69,000	89,000
B	1,530	4,100	100
C	260,000	134,000	160,000
D	910	350	3,400

Assume no capital constrain exists and that the projects are not mutually exclusive.

What is the net present value of Project A?

What is the internal rate of return of project B?

What is the profitability index of project C?

According to the net present value rule, which of the projects should be accepted? ( you can invest in any one project, any two projects, three projects or all four projects)

According to the internal rate of return rule, which of the projects should be accepted?

According to the profitability-index rule, which of the following projects should be accepted?

For this part only, assume no capital constraint exist but that project A,B,C, and D are mutually exclusive. Only one of these projects can be undertaken. Which project should the company undertake in order to make its stockholders as well as as possible?

Expert Solution

jeff jeffy answered 1 year ago

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