Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 –$227,084 –$14,907 1 25,100 4,769 2 57,000...

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Finance

Consider the following two mutually exclusive projects:

Year Cash Flow (A) Cash Flow (B)
0 –$227,084        –$14,907
1 25,100        4,769
2 57,000        8,356
3 57,000        13,387
4 423,000        8,088

Whichever project you choose, if any, you require a 6 percentreturn on your investment.
Required:
(a) What is the payback period for Project A?
(Click to select)  3.05 years  3.11years  3.37 years  3.3 years  3.21years

(b) What is the payback period for Project B?
(Click to select)  2.07 years  2.2years  2.13 years  2.24 years  2.03years

(c) What is the discounted payback period for Project A?
(Click to select)  3.21 years  3.31years  3.15 years  3.48 years  3.41years

(d) What is the discounted payback period for Project B?
(Click to select)  2.26 years  2.33years  2.15 years  2.38 years  2.2years

(e) What is the NPV for Project A?
(Click toselect)  $230,238.96  $218,727.01  $241,750.91  $237,146.13  $223,331.79

(f) What is the NPV for Project B ?
(Click toselect)  $13,941.54  $15,115.56  $14,675.3  $14,235.04  $15,409.07

(g) What is the IRR for Project A?
(Click toselect)  31.5%  30%  28.5%  29.1%  30.9%
(h) What is the IRR for Project B?
(Click toselect)  40.95%  40.17%  39%  37.83%  37.05%

(i) What is the profitability index for Project A?
(Click toselect)  2.014  1.913  1.953  2.115  2.074

(j) What is the profitability index for Project B?
(Click toselect)  1.925  1.984  2.044  2.084  1.885

Answer & Explanation Solved by verified expert

4.3 Ratings (694 Votes)

Present Value Future value 1rt where r is the interest rate that is 6 and t is the time period in years Net present value NPV initial investment sum of present values of See Answer

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Consider the following two mutually exclusive projects: YearCash Flow (A)Cash Flow (B)0–$227,084 –$14,907 125,100 4,769 257,000 8,356 357,000 13,387 4423,000 8,088 Whichever project you choose, if any, you require a 6 percentreturn on your investment.Required:(a)What is the payback period for Project A?(Click to select) 3.05 years 3.11years 3.37 years 3.3 years 3.21years (b)What is the payback period for Project B?(Click to select) 2.07 years 2.2years 2.13 years 2.24 years 2.03years(c)What is the discounted payback period for Project A?(Click to select) 3.21 years 3.31years 3.15 years 3.48 years 3.41years(d)What is the discounted payback period for Project B?(Click to select) 2.26 years 2.33years 2.15 years 2.38 years 2.2years(e)What is the NPV for Project A?(Click toselect) $230,238.96 $218,727.01 $241,750.91 $237,146.13 $223,331.79(f)What is the NPV for Project B ?(Click toselect) $13,941.54 $15,115.56 $14,675.3 $14,235.04 $15,409.07 (g)What is the IRR for Project A?(Click toselect) 31.5% 30% 28.5% 29.1% 30.9%(h)What is the IRR for Project B?(Click toselect) 40.95% 40.17% 39% 37.83% 37.05%(i)What is the profitability index for Project A?(Click toselect) 2.014 1.913 1.953 2.115 2.074(j)What is the profitability index for Project B?(Click toselect) 1.925 1.984 2.044 2.084 1.885

Year	Cash Flow (A)	Cash Flow (B)
0	–$227,084	–$14,907
1	25,100	4,769
2	57,000	8,356
3	57,000	13,387
4	423,000	8,088

(a)	What is the payback period for Project A?

	(Click to select) 3.05 years 3.11years 3.37 years 3.3 years 3.21years

(b)	What is the payback period for Project B?

	(Click to select) 2.07 years 2.2years 2.13 years 2.24 years 2.03years

(c)	What is the discounted payback period for Project A?

	(Click to select) 3.21 years 3.31years 3.15 years 3.48 years 3.41years

(d)	What is the discounted payback period for Project B?

	(Click to select) 2.26 years 2.33years 2.15 years 2.38 years 2.2years

(e)	What is the NPV for Project A?

	(Click toselect) $230,238.96 $218,727.01 $241,750.91 $237,146.13 $223,331.79

(f)	What is the NPV for Project B ?

	(Click toselect) $13,941.54 $15,115.56 $14,675.3 $14,235.04 $15,409.07

(g)	What is the IRR for Project A?

	(Click toselect) 31.5% 30% 28.5% 29.1% 30.9%

(h)	What is the IRR for Project B?

	(Click toselect) 40.95% 40.17% 39% 37.83% 37.05%

(i)	What is the profitability index for Project A?

	(Click toselect) 2.014 1.913 1.953 2.115 2.074

(j)	What is the profitability index for Project B?

	(Click toselect) 1.925 1.984 2.044 2.084 1.885