Wang Food Market, Inc. has given you the following information on the two mutually exclusive projects under consideration: Annual Cash Flows 1 Year Project A 0 (R30 000) 1 10 000 2 10 000 3 10 000 4 10 000 5 10 000 Project B (60 000) 20 000 20 000 20 000 20 000 20 000 Wang requires a 14 percent rate of return on projects of this nature. (a) Compute the internal rate of return on both projects. (4) (b) Compute the profitability index of both projects. (4) (c) Compute the payback period of both projects. (4) (d) Which of the two projects, if either, should Wang accept? Why? (4)
Wang Food Market, Inc. has given you the following information on the two mutually exclusive projects under consideration: Annual Cash Flows 1 Year Project A 0 (R30 000) 1 10 000 2 10 000 3 10 000 4 10 000 5 10 000 Project B (60 000) 20 000 20 000 20 000 20 000 20 000 Wang requires a 14 percent rate of return on projects of this nature. (a) Compute the internal rate of return on both projects. (4) (b) Compute the profitability index of both projects. (4) (c) Compute the payback period of both projects. (4) (d) Which of the two projects, if either, should Wang accept? Why? (4)
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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Wang Food Market, Inc. has given you the following information on the two mutually exclusive projects under consideration:
Annual Cash Flows
1
Year Project A
0 (R30 000)
1 10 000
2 10 000
3 10 000
4 10 000
5 10 000
Project B (60 000) 20 000 20 000 20 000 20 000 20 000
Wang requires a 14 percent rate of return on projects of this nature.
(a) Compute the internal rate of return on both projects. (4)
(b) Compute the profitability index of both projects. (4)
(c) Compute the payback period of both projects. (4)
(d) Which of the two projects, if either, should Wang accept? Why? (4)
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