Mr Ali has an option of investing in one project from the proposed three different projects. Discount rate is 12%. The initial investment and cash flows are given below years Cf – project 1 Cf – project 2 Cf – project 3 0 (10,000) (28,000) (22,000) 1 1000 3000 4000 2 880 7000 1000 3 6000 8000 1000 4 4000 12000 9000 5 2000 7500 11500 6 3650 6400 8900   a. Calculate payback for all three projects​​​​​ b. Calculate discounted payback for all three projects​​​ c. Calculate NPV for all three projects​​​​​ d. Calculate profitability index for all three projects​​​ e. Calculate IRR for all three projects​​​​​ f. Write a detailed comment on which project Mr Ali must invest on the basis of above calculated criteria’s and why he must ignore the other projects.

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
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Mr Ali has an option of investing in one project from the proposed three different projects. Discount rate is 12%. The initial investment and cash flows are given below

years

Cf – project 1

Cf – project 2

Cf – project 3

0

(10,000)

(28,000)

(22,000)

1

1000

3000

4000

2

880

7000

1000

3

6000

8000

1000

4

4000

12000

9000

5

2000

7500

11500

6

3650

6400

8900

 

a. Calculate payback for all three projects​​​​​
b. Calculate discounted payback for all three projects​​​
c. Calculate NPV for all three projects​​​​​
d. Calculate profitability index for all three projects​​​
e. Calculate IRR for all three projects​​​​​
f. Write a detailed comment on which project Mr Ali must invest on the basis of above calculated criteria’s and why he must ignore the other projects. 
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