Whichever project you choose if any you require a 6 percent

Whichever project you choose, if any, you require a 6 percent return on your investment

Consider the following two mutually exclusive projects: Cash Flow (A) -$236,176 27,300 58,000 59,000 390,000 Cash Flow (B) Year 0 -$15,631 4,407 8,484 13,807 9,896 Whichever project you choose, if any, you require a 6 percent return on your investment. Required (a) What is the payback period for Project A? | (Click to select): (b) What is the payback period for Project B? (Click to select) (c) What is the discounted payback period for Project A? (Click to select)+ (d) What is the discounted payback period for Project B? (Click to select (e) What is the NPV for Project A? (Click to select)+ (f) What is the NPV for Project B? (Click to select) (g) What is the IRR for Project A? (Click to select) (h) What is the IRR for Project B? (Click to select) (i) What is the profitability index for Project A? (Click to select) i) What is the profitability index for Project B? (Click to select)

Solution

Project A:

Payback = 3.24 years

discounted payback = 3.35 years

NPV = 199,652.58

PI = 1.85

IRR = 27.00%

Project B

Payback = 2.20 years

discounted payback = 2.34 years

NPV = 15,508.46

PI = 1.99

IRR = 38.00%

Choose A since it has a higher NPV

Discount rate	6.0000%
Cash flows	Year	Discounted CF= cash flows/(1+rate)^year	Cumulative cash flow
(236,176.00)	0	(236,176.00)	(236,176.00)
27,300.000	1	25,754.72	(210,421.28)
58,000.000	2	51,619.79	(158,801.49)
59,000.000	3	49,537.54	(109,263.95)
390,000.000	4	308,916.53	199,652.58