Use the information below and help the management in choosing the most desirable Project using all the following techniques: 1) Payback Period Technique. 2) Discounted Payback Period Technique. 3) Net Present Value Technique 4) Profitability Index Technique. Based on your answer which project is better and why? please show the steps and formula Thanks

Use the information below and help the management in choosing the most desirable Project using all the following techniques: 1) Payback Period Technique. 2) Discounted Payback Period Technique. 3) Net Present Value Technique 4) Profitability Index Technique. Based on your answer which project is better and why? please show the steps and formula Thanks

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter11: The Cost Of Capital

Section: Chapter Questions

Problem 19PROB

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

Use the information below and help the management in choosing the most desirable Project using all the following techniques:

1) Payback Period Technique.
2) Discounted Payback Period Technique.
3) Net Present Value Technique
4) Profitability Index Technique.

Based on your answer which project is better and why?

please show the steps and formula

Thanks

Salalah company management is considering two competing investment Projects A and B.
Project A
8000
Project B
8000
Year
Initial Investment
1
2750
3000
2750
3000
2750
3000
4
2750
3000
2750
3000
DISCOUNT RATE 5.05%

Definition Definition Calculation used to evaluate the investment and financing decisions that involve cash flows occurring over multiple periods. NPV is calculated as the difference between the present value of cash inflow and cash outflow. NPV is used for capital budgeting and investment planning as well as to compare similar investment alternatives.

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