Principles of Managerial Finance, Student Value Edition (15th Edition) (The Pearson Series in Finance)
Principles of Managerial Finance, Student Value Edition (15th Edition) (The Pearson Series in Finance)
15th Edition
ISBN: 9780134478166
Author: Chad J. Zutter, Scott B. Smart
Publisher: PEARSON
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Chapter 10, Problem 10.1STP

All techniques with NPV profile: Mutually exclusive projects Fitch Industries is in the process of choosing the better of two equal-risk, mutually exclusive capital expenditure projects, M and N. The relevant cash flows for each project are shown in the following table The firm’s cost of capital is 9%.

  Project M Project N
Initial investment (CF0) –$40,000 –$40,000
Year(t) Cash inflows (CFt)  
1 $14,000 $23,000
2 14,000 12,000
3 14,000 10,000
4 14,000 9,000
  1. a. Calculate each project’s payback period.
  2. b. Calculate the net present value (NPV) for each project.
  3. c. Calculate the internal rate of return (IRR) for each project.
  4. d. Summarize the preferences dictated by each measure you calculated, and indicate which project you would recommend. Explain why.
  5. e. Draw the net present value profiles for these projects on the same set of axes, and explain the circumstances under which a conflict in ran kings might exist.
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Principles of Managerial Finance, Student Value Edition (15th Edition) (The Pearson Series in Finance)

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Capital Budgeting Introduction & Calculations Step-by-Step -PV, FV, NPV, IRR, Payback, Simple R of R; Author: Accounting Step by Step;https://www.youtube.com/watch?v=hyBw-NnAkHY;License: Standard Youtube License