All techniques: Decision among mutually exclusive investments Pound Industries is attempting to select the best of three mutually exclusive projects. The initial investment and subs cash inflows associated with these projects are shown in the following table. Cash flows Initial investment (CF) Cash inflows (CF), t= 1 to 5 Project A $80,000 $25,000 a. The payback period of project A is years. (Round to two decimal places.) The payback period of project B is years. (Round to two decimal places.) The payback period of project C is years. (Round to two decimal places.) b. The NPV of project A is $. (Round to the nearest cent.) The NPV of project B is $. (Round to the nearest cent.) The NPV of project C is $. (Round to the nearest cent.) 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 11%. c. Calculate the internal rate of return (IRR) for each project. d. Indicate which project you would recommend. Project B $110,000 $36,000 CO Project C $110,000 $36,500

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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All techniques: Decision among mutually exclusive investments Pound Industries is attempting to select the best of three mutually exclusive projects. The initial investment and subsequent
cash inflows associated with these projects are shown in the following table.
Cash flows
Initial investment (CF)
Cash inflows (CF), t= 1 to 5
OA. Project A
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 11%.
c. Calculate the internal rate of return (IRR) for each project.
d. Indicate which project you would recommend.
a. The payback period of project A is
The payback period of project B is
The payback period of project C is
b. The NPV of project A is $
The NPV of project B is $
(Round to the nearest cent.)
The NPV of project C is $. (Round to the nearest cent.)
c. The IRR of project A is%. (Round to two decimal places.)
The IRR of project B is
%. (Round to two decimal places.)
The IRR of project C is
%. (Round to two decimal places.)
d. Which project would you recommend? (Select the best answer below.)
years. (Round to two decimal places.)
years. (Round to two decimal places.)
years. (Round to two decimal places.)
Project A
$80,000
$25,000
. (Round to the nearest cent.)
Project B
$110,000
$36,000
Project C
$110,000
$36,500
Transcribed Image Text:All techniques: Decision among mutually exclusive investments Pound Industries is attempting to select the best of three mutually exclusive projects. The initial investment and subsequent cash inflows associated with these projects are shown in the following table. Cash flows Initial investment (CF) Cash inflows (CF), t= 1 to 5 OA. Project A 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 11%. c. Calculate the internal rate of return (IRR) for each project. d. Indicate which project you would recommend. a. The payback period of project A is The payback period of project B is The payback period of project C is b. The NPV of project A is $ The NPV of project B is $ (Round to the nearest cent.) The NPV of project C is $. (Round to the nearest cent.) c. The IRR of project A is%. (Round to two decimal places.) The IRR of project B is %. (Round to two decimal places.) The IRR of project C is %. (Round to two decimal places.) d. Which project would you recommend? (Select the best answer below.) years. (Round to two decimal places.) years. (Round to two decimal places.) years. (Round to two decimal places.) Project A $80,000 $25,000 . (Round to the nearest cent.) Project B $110,000 $36,000 Project C $110,000 $36,500
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