Consider the following cash flows of two mutually exclusive projects for Dubai Company. Assume the discount rate for Dubai Company is 10 percent. Required: Based on the payback period, which project should be taken? Based on the NPV, which project should be taken? Based on the IRR, which project should be taken?
Consider the following cash flows of two mutually exclusive projects for Dubai Company. Assume the discount rate for Dubai Company is 10 percent. Required: Based on the payback period, which project should be taken? Based on the NPV, which project should be taken? Based on the IRR, which project should be taken?
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
Section: Chapter Questions
Problem 1PS
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Consider the following cash flows of two mutually exclusive projects for Dubai Company. Assume the discount rate for Dubai Company is 10 percent.
Required:
- Based on the payback period, which project should be taken?
- Based on the NPV, which project should be taken?
- Based on the
IRR , which project should be taken? - Based on this analysis, is incremental IRR analysis necessary? If yes, conduct the analysis.
Transcribed Image Text:Project M
-$1,400,000
900,000
800,000
700,000
Project N
-$600,000
300,000
500,000
400,000
Year
1
2
3
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