Kenny, Inc. has identified the following two mutually exclusive projects. Project A -$25,000 20,000 5,000 3,000 10,000 Considering 10% required return for both projects. Project B -S28,000 7,000 1,000 -2,000 Year 2 3 4 30,000 a. Calculate the NPV for each project, which one is more profitable? Why? b. If the payback cut-offis four years, which project should be accepted? Why? c. If the Internal Rate of Return (IRR) of projects A and B are 10% and 12% respectfully, which project would you choose? Why? d. Considering 10% required return, and applying profitability index criteria which investment would you choose? Why? e. After applying the last four investment criteria, which project should be chosen for investment and why?
Kenny, Inc. has identified the following two mutually exclusive projects. Project A -$25,000 20,000 5,000 3,000 10,000 Considering 10% required return for both projects. Project B -S28,000 7,000 1,000 -2,000 Year 2 3 4 30,000 a. Calculate the NPV for each project, which one is more profitable? Why? b. If the payback cut-offis four years, which project should be accepted? Why? c. If the Internal Rate of Return (IRR) of projects A and B are 10% and 12% respectfully, which project would you choose? Why? d. Considering 10% required return, and applying profitability index criteria which investment would you choose? Why? e. After applying the last four investment criteria, which project should be chosen for investment and why?
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter12: Capital Budgeting: Decision Criteria
Section: Chapter Questions
Problem 11MC: In an unrelated analysis, you have the opportunity to choose between the following two mutually...
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