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 show the following table. Project A $30,000 $10,000 Project C $60,000 $22,500 Cash flows Initial investment (CF) Cash inflows (CF), t= 1 to 5 Project B $70,000 $21,500 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 12%. 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 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.) 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.)
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 show the following table. Project A $30,000 $10,000 Project C $60,000 $22,500 Cash flows Initial investment (CF) Cash inflows (CF), t= 1 to 5 Project B $70,000 $21,500 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 12%. 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 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.) 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.)
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter12: Capital Investment Analysis
Section: Chapter Questions
Problem 2PA
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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 after-tax cash inflows associated with these projects are shown in
the following table.
Project B
$70,000
$21,500
Project C
$60,000
$22,500
Cash flows
Initial investment (CF)
Cash inflows (CF), t= 1 to 5
Project A
$30,000
$10,000
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 12%.
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
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.)
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.)
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