Two projects, Y and Z, have the following cash flows: Year Project Y Project Z 0 -500 -1700 1 400 700 2 250 800 3 150 950 Project Y and Project Z are mutually exclusive. The discount rate is 8%. Which of the following is not true? a. NPV of Project Z is 388.16. b. The PI (profitability index) of Project Y is higher than the PI of Project Z. c. Because the PI of Project Y is higher than that of Project Z, Project Y should be chosen. d. The payback period of Project Y is less than 2 years. e. The payback period for Project Z is longer than that of Project Y.
Two projects, Y and Z, have the following cash flows: Year Project Y Project Z 0 -500 -1700 1 400 700 2 250 800 3 150 950 Project Y and Project Z are mutually exclusive. The discount rate is 8%. Which of the following is not true? a. NPV of Project Z is 388.16. b. The PI (profitability index) of Project Y is higher than the PI of Project Z. c. Because the PI of Project Y is higher than that of Project Z, Project Y should be chosen. d. The payback period of Project Y is less than 2 years. e. The payback period for Project Z is longer than that of Project Y.
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
Problem 1PS
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Question
Two projects, Y and Z, have the following cash flows:
|
Year |
Project Y |
Project Z |
|
0 |
-500 |
-1700 |
|
1 |
400 |
700 |
|
2 |
250 |
800 |
|
3 |
150 |
950 |
|
|
|
|
Project Y and Project Z are mutually exclusive. The discount rate is 8%. Which of the following is not true?
| a. |
NPV of Project Z is 388.16. |
|
| b. |
The PI (profitability index) of Project Y is higher than the PI of Project Z. |
|
| c. |
Because the PI of Project Y is higher than that of Project Z, Project Y should be chosen. |
|
| d. |
The payback period of Project Y is less than 2 years. |
|
| e. |
The payback period for Project Z is longer than that of Project Y. |
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