Consider the following two mutually exclusive projects: YearCash Flow (A)Cash Flow (B)0–$426,000 –$40,500 143,500 20,500 262,500 13,200 379,500 19,100 4541,000 15,900 The required return on these investments is 12 percent. a.What is the payback period for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)b.What is the NPV for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)c.What is the IRR for each project? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)d.What is the profitability index for each project? (Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.)e.Based on your answers in (a) through (d), which project will you finally choose?

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Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 13P

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Consider the following two mutually exclusive projects:

Year	Cash Flow (A)	Cash Flow (B)
0	–$426,000	–$40,500
1	43,500	20,500
2	62,500	13,200
3	79,500	19,100
4	541,000	15,900


The required return on these investments is 12 percent.

a.	What is the payback period for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
b.	What is the NPV for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
c.	What is the IRR for each project? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
d.	What is the profitability index for each project? (Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.)
e.	Based on your answers in (a) through (d), which project will you finally choose?

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d.	What is the profitability index for each project? (Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.)

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