Question

All techniques—Decision among mutually exclusive investments???

Pound Industries is attempting to select the best of three mutually exclusive projects. The initial investment and?after-tax cash inflows associated with these projects are shown in the following table.

Cash flows	Project A		Project B		Project C
Initial investment? (CF)	?$40,000		?$80,000		?$90,000
Cash inflows? (CF), tequals=1 to 5	?$15,000		?$26,500		?$27,500

a. Calculate the payback period for each project.

b. Calculate the net present value? (NPV) of each? project, assuming that the firm has a cost of capital equal to 8?%.

c. Calculate the internal rate of return? (IRR) for each project.

d. Indicate which project you would recommend.

Answer 1