Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0-$416,000 -$35,500 19,500 14,200 14,100 10,900 1 2 234 3 4 e. The required return on these investments is 12 percent. a. What is the payback period for each project? (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? (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? (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? (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 48,500 57,500 74,500 531,000 Project B d. Project A Project B years years % %
Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0-$416,000 -$35,500 19,500 14,200 14,100 10,900 1 2 234 3 4 e. The required return on these investments is 12 percent. a. What is the payback period for each project? (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? (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? (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? (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 48,500 57,500 74,500 531,000 Project B d. Project A 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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Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 1 a. 2 3 4 The required
Transcribed Image Text:Consider the following two mutually exclusive projects:
Year Cash Flow (A) Cash Flow (B)
0
-$35,500
1
19,500
14,200
14,100
10,900
-234
-$416,000
48,500
57,500
74,500
531,000
The required return on these investments is 12 percent.
a. What is the payback period for each project? (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? (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? (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? (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
e.
Project B
d. Project A
Project B
years
years
%
%
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