Question

Given the following cash flows, for the two independent projects A and B, calculate Payback Period                          

  1. Given the following cash flows, for the two independent projects A and B, calculate
    1. Payback Period                                                               
    2. Accounting rate of return                                               
    3. Net Present Value                                                         
    4. Profitability index                                                          

And recommend acceptance or rejection of projects considering individual techniques of capital budgeting. A rate of 10 % has been selected for the NPV analysis.

Project A

Project B

Initial outlay

$50,000

$100,000

Cash inflows

Year 1

$10,000

$ 25,000

Year 2

15,000

25,000

Year 3

20,000

25,000

Year 4

25,000

25,000

Year 5

30,000

25,000
  1. b.Explain the distinctive features of capital budgeting decisions.                                                                                                       
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