Question We have two investment projects A&B. Both projects cost $250, and we require a 15% return...

60.1K

Verified Solution

Question

Finance

Question
We have two investment projects A&B. Both projects cost$250, and we require a 15% return of the two
investments.
Year A B
1 $100 $100
2 $100 $200
3 $100 0
4 $100 0
a) Based on the payback period rule, which projectwould you pick? Explain.
b) Based on the NPV rule, which project would youpick? Explain.
c) Do a) and b) give you the same conclusion? Ifnot, why? Please elaborate.
d) What other methods can you use to evaluateproposed investments? Please explain.

Answer & Explanation Solved by verified expert

4.5 Ratings (996 Votes)

Cumulative cash flow present value year Project A Project B Project A Project B PVIF 15 Project A Project B 0 250 250 250 250 10000 25000 25000 1 100 100 150 150 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

QuestionWe have two investment projects A&B. Both projects cost$250, and we require a 15% return of the twoinvestments.Year A B1 $100 $1002 $100 $2003 $100 04 $100 0a) Based on the payback period rule, which projectwould you pick? Explain.b) Based on the NPV rule, which project would youpick? Explain.c) Do a) and b) give you the same conclusion? Ifnot, why? Please elaborate.d) What other methods can you use to evaluateproposed investments? Please explain.

Question We have two investment projects A&amp;B. Both projects cost $250, and we require a 15% return...