Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 -$ 433,000 -$ 44,000 1 40,000 21,200 2 66,000 12,500 3 83,000 22,600 4 548,000 19,400 The required return on these investments is 14 percent. a. What is the payback period for each project? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. b. What is the NPV for each project? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. c. What is the IRR for each project? Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. d. What is the profitability index for each project? Note: Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161. e. Based on your answers in (a) through (d), which project will you finally choose? a. Project A Project B b. Project A Project B c. Project A Project B d. Project A e. Project B years years % %
Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 -$ 433,000 -$ 44,000 1 40,000 21,200 2 66,000 12,500 3 83,000 22,600 4 548,000 19,400 The required return on these investments is 14 percent. a. What is the payback period for each project? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. b. What is the NPV for each project? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. c. What is the IRR for each project? Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. d. What is the profitability index for each project? Note: Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161. e. Based on your answers in (a) through (d), which project will you finally choose? a. Project A Project B b. Project A Project B c. Project A Project B d. Project A e. Project B years years % %
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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Transcribed Image Text:Consider the following two mutually exclusive projects:
Year
Cash Flow (A)
Cash Flow (B)
0
-$ 433,000
-$ 44,000
1
40,000
21,200
2
66,000
12,500
3
83,000
22,600
4
548,000
19,400
The required return on these investments is 14 percent.
a. What is the payback period for each project?
Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.
b. What is the NPV for each project?
Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.
c. What is the IRR for each project?
Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.
d. What is the profitability index for each project?
Note: Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.
e. Based on your answers in (a) through (d), which project will you finally choose?
a. Project A
Project B
b. Project A
Project B
c. Project A
Project B
d. Project A
e.
Project B
years
years
%
%
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