Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 -$215,000 -$ 57,000 34,000 32,900 24,300 45,000 51,000 270,000 3 4 18,300 17,800 The required return on these investments is 13 percent. a. What is the payback period for each project? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. b. What is the NPV for each project? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. c. What is the IRR for each project? Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. d. What is the profitability index for each project? Note: Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161. e. Based on your answers in (a) through (d), which project will you finally choose?

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
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Consider the following two mutually exclusive projects:
Cash Flow (A)
Cash Flow (B)
-$ 215,000
34,000
-$ 57,000
32,900
45,000
24,300
18,300
51,000
270,000
17,800
The required return on these investments is 13 percent.
a. What is the payback period for each project?
Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.
b. What is the NPV for each project?
Year
0
WNIO
1
2
3
4
Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.
c. What is the IRR for each project?
Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.
d. What is the profitability index for each project?
Note: Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.
e. Based on your answers in (a) through (d), which project will you finally choose?
a. Project A
Project B
b. Project A
Project B
c. Project A
Project B
d. Project A
Project B
years
years
%
%
Transcribed Image Text:Consider the following two mutually exclusive projects: Cash Flow (A) Cash Flow (B) -$ 215,000 34,000 -$ 57,000 32,900 45,000 24,300 18,300 51,000 270,000 17,800 The required return on these investments is 13 percent. a. What is the payback period for each project? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. b. What is the NPV for each project? Year 0 WNIO 1 2 3 4 Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. c. What is the IRR for each project? Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. d. What is the profitability index for each project? Note: Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161. e. Based on your answers in (a) through (d), which project will you finally choose? a. Project A Project B b. Project A Project B c. Project A Project B d. Project A Project B years years % %
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