FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Comparing Investment Criteria [L01,2,3,5,7] Consider the following two mutually exclusive projects:
Year
0 -$300,000 -$40,000
1 20,000 19,000
2 50,000 12,000
3 50,000 18,000
4 390,000 10,500
Whichever project you choose, if any, you require a 15 per cent return on your investment.
a. If you apply the payback criterion, which will you choose? Why?
b. If you apply the discounted payback criterion, which investment will you choose? Why?
c. If you apply the
d. If you apply the
e. If you apply the profitability index criterion, which investment will you choose? Why?
f. Based on your answers in (a) through (e), which project will you finally choose? Why?
Please explain your calculations and conclusions
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