Question

# Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 –\$40,000...

 Consider the following two mutually exclusive projects:
 Year Cash Flow (A) Cash Flow (B) 0 –\$40,000 –\$180,000 1 25,000 15,000 2 22,000 45,000 3 20,000 50,000 4 15,000 275,000
 The required return on these investments is 11 percent.
 Required: (a) What is the payback period for each project? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).)
 Payback period Project A years Project B years
 (b) What is the NPV for each project? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g.,32.16).)
 Net present value Project A \$ Project B \$
 (c) What is the IRR for each project? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)
 Internal rate of return Project A % Project B %
 (d) What is the profitability index for each project? (Do not round intermediate calculations. Round your answers to 3 decimal places (e.g., 32.161).)
 Profitability index Project A Project B
 (e) Based on your answers in (a) through (d), which project will you finally choose? (Click to select)   Project A   Project B
 Year Cash Flow 0 –\$ 12,000 1 4,500 2 6,000 3 6,600 4 4,800 5 – 4,100
 Requirement 1: The company uses an interest rate of 16 percent on all of its projects. In the table below, show the modified cash flows and calculate the modified internal rate of return (MIRR) using the "combination" approach. (Do not round intermediate calculations. Negative amounts should be indicated with a minus sign. Round your answers to 2 decimal places (e.g., 32.16).)
 Year Combination Approach 0 \$ 1 \$ 2 \$ 3 \$ 4 \$ 5 \$ MIRR %

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