A techniques-Decision among mutually exclusive investments Pound Industries is attempting to select the best of three mutually exclusive projects. The initial investment and after-tax cash inflows associated with these projects are shown in the following table. Cash flows Initial investment (CF) Project A $60,000 Project B $100,000 Project C $90,000 Cash inflows (CF), t=1 to 5 $20,000 $31,500 $32,000 a. Calculate the payback period for each project. b. Calculate the net present value (NPV) of each project, assuming that the firm has a cost of capital equal to 12%. c. Calculate the internal rate of return (IRR) for each project. d. Indicate which project you would recommend. a. The payback period of project A is years. (Round to two decimal places.) % [7%
A techniques-Decision among mutually exclusive investments Pound Industries is attempting to select the best of three mutually exclusive projects. The initial investment and after-tax cash inflows associated with these projects are shown in the following table. Cash flows Initial investment (CF) Project A $60,000 Project B $100,000 Project C $90,000 Cash inflows (CF), t=1 to 5 $20,000 $31,500 $32,000 a. Calculate the payback period for each project. b. Calculate the net present value (NPV) of each project, assuming that the firm has a cost of capital equal to 12%. c. Calculate the internal rate of return (IRR) for each project. d. Indicate which project you would recommend. a. The payback period of project A is years. (Round to two decimal places.) % [7%
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:A techniques-Decision among mutually exclusive investments Pound Industries is attempting to select the best
of three mutually exclusive projects. The initial investment and after-tax cash inflows associated with these projects are
shown in the following table.
Cash flows
Initial investment (CF)
Project A
$60,000
Project B
$100,000
Project C
$90,000
Cash inflows (CF), t=1 to 5
$20,000
$31,500
$32,000
a. Calculate the payback period for each project.
b. Calculate the net present value (NPV) of each project, assuming that the firm has a cost of capital equal to 12%.
c. Calculate the internal rate of return (IRR) for each project.
d. Indicate which project you would recommend.
a. The payback period of project A is years. (Round to two decimal places.)
%
[7%
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