Question

Consider the following two mutually exclusive projects:

Year Cash Flow

(A) Cash Flow

(B)

0 –$ 341,000 –$ 51,000

1 54,000 24,900

2 74,000 22,900

3 74,000 20,400

4 449,000 15,500

Whichever project you choose, if any, you require a return of
15 percent on your investment.

a-1 What is the payback period for each project? (Do not round
intermediate calculations and round your answers to 2 decimal
places, e.g., 32.16.)

a-2 If you apply the payback criterion, which investment will
you choose?

Project A

Project B

b-1 What is the discounted payback period for each project?
(Do not round intermediate calculations and round your answers to 2
decimal places, e.g., 32.16.)

b-2 If you apply the discounted payback criterion, which
investment will you choose?

Project A

Project B

c-1 What is the NPV for each project? (Do not round
intermediate calculations and round your answers to 2 decimal
places, e.g., 32.16.)

c-2 If you apply the NPV criterion, which investment will you
choose?

Project A

Project B

d-1 What is the IRR for each project? (Do not round
intermediate calculations. Enter your answers as a percent rounded
to 2 decimal places, e.g., 32.16.)

d-2 If you apply the IRR criterion, which investment will you
choose?

Project A

Project B

e-1 What is the profitability index for each project? (Do not
round intermediate calculations and round your answers to 3 decimal
places, e.g., 32.161.)

e-2 If you apply the profitability index criterion, which
investment will you choose?

Project A

Project B

f. Based on your answers in (a) through (e), which project
will you finally choose?

Answer #1

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0
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1
25,000
15,000
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22,000
45,000
3
20,000
50,000
4
15,000
275,000
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Required:
(a)
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(Do not round intermediate
calculations. Round your answers to 2 decimal
places (e.g., 32.16).)
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Project B
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(Do not round intermediate calculations and round your
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