What is the payback period for each project? (Do not round intermediate calculat

Question

  

  

  

What is the payback period for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

  

  

  

What is the discounted payback period for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

  

  

  

What is the NPV for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

  

  

  

What is the IRR for each project? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

  

  

  

What is the profitability index for each project? (Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.)

  

  

Consider the following two mutually exclusive projects:

Explanation / Answer

a-2. Applying the payback criterion, Project B will be chosen

b-1.

Discounted payback:

Project A = 3 + [349000-130996] / [374428-130996]

= 3.90 years

Project B = 2 + [49000-37194] / [49758-37194]

= 2.94 years

b-2. If you apply the discounted payback criterion, Project B will be chosen

c-1. NPV = Present Value of cash inflows - Investment

Project A = 374428 - 349000 = $25428

Project B = 57872 - 49000 = $8872

c-2. If you apply the NPV criterion, Project A will be chosen.

Year PVF Project A Project B Cash flows PV Cumulative Cash flows PV Cumulative 1 0.862 46000 39652 39652 24100 20774 20774 2 0.743 66000 49038 88690 22100 16420 37194 3 0.641 66000 42306 130996 19600 12564 49758 4 0.552 441000 243432 374428 14700 8114 57872

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