Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 –$316,951 –$15,457 1 27,400 4,426 2 58,000 8,829 3 54,000 13,079 4 425,000 9,565 Whichever project you choose, if any, you require a...

70.2K

Verified Solution

Question

Finance

Consider the following twomutually exclusive projects:

Year Cash Flow(A) Cash Flow(B)
0 –$316,951       –$15,457
1 27,400       4,426
2 58,000       8,829
3 54,000       13,079
4 425,000       9,565

Whichever project you choose, ifany, you require a 6 percent return on your investment.
a. What is thepayback period for Project A?

b. What is thepayback period for Project B?
c. What is thediscounted payback period for Project A?
d. What is thediscounted payback period for Project B?
e. What is theNPV for Project A?
f. What is theNPV for Project B ?

g. What is theIRR for Project A?
h. What is theIRR for Project B?
i. What is theprofitability index for Project A?
j. What is theprofitability index for Project B?

Answer & Explanation Solved by verified expert

4.0 Ratings (601 Votes)

Answer a b Calculation of Payback period for Project A and Project B Project A Project B Year Cash flow Cumulative Cash Flow Cash flow Cumulative Cash Flow 0 31695100 31695100 1545700 1545700 1 2740000 28955100 442600 1103100 2 5800000 23155100 882900 220200 3 5400000 17755100 1307900 1087700 4 42500000 24744900 956500 2044200 Payback period for Project A 3 Years 177551 425000 342 years Payback period for See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

Consider the following twomutually exclusive projects: YearCash Flow(A)Cash Flow(B)0–$316,951 –$15,457 127,400 4,426 258,000 8,829 354,000 13,079 4425,000 9,565 Whichever project you choose, ifany, you require a 6 percent return on your investment.a. What is thepayback period for Project A? b. What is thepayback period for Project B?c. What is thediscounted payback period for Project A?d. What is thediscounted payback period for Project B?e. What is theNPV for Project A?f. What is theNPV for Project B ? g. What is theIRR for Project A?h. What is theIRR for Project B?i. What is theprofitability index for Project A?j. What is theprofitability index for Project B?

Year	Cash Flow(A)	Cash Flow(B)
0	–$316,951	–$15,457
1	27,400	4,426
2	58,000	8,829
3	54,000	13,079
4	425,000	9,565