The treasurer of Alma Corporation has projected the cash flows of Projects A and B...
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The treasurer of Alma Corporation has projected the cash flows of Projects A and B as follows: Project A Project B CF. -570,000 - 570,000 CF 340,000 220,000 CF2 200,000 360,000 CF3 320,000 400,000 The relevant discount rate is 12 percent. The company imposes a payback cut-off of three years for its investment projects. Instructions: 1. If these two projects are independent, which project(s) should Alma accept based on: a. The Payback rule? Explain. (5 points) b. The Profitability Index rule? Explain. (5 points) c. The IRR rule? Explain. (5 points) d. The NPV rule? Explain. (5 points) 2. If these two projects are mutually exclusive, which project should Alma accept? Explain. (5 points)
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