Whichever project you choose, if any, you require a 15 percent return on your in

Question

Whichever project you choose, if any, you require a 15 percent return on your investment.

The payback period for Projects A and B is ____ and ____ years, respectively. (Round your answers to 2 decimal places. (e.g., 32.16))

The NPV for Projects A and B is $ ____ and $____ , respectively. (Do not include the dollar sign ($). Round your answers to 2 decimal places, (e.g., 32.16))

The IRR for Projects A and B is ____ percent and ____ percent ,respectively. (Do not include the percent sign (%). Round your answers to 2 decimal places. (e.g., 32.16))

Consider the following cash flows of two mutually exclusive projects for AZ-Motorcars.

Explanation / Answer

AZM:

Total payments in 3 years = 138,100

payback = 3 + (214,952 - 138,100)/422,000 = 3.18 years

NPV = 127,892.59

IRR = 31.98%

AZF:

payments in first two years = 26,109

payback = 2 + (33,404 - 26,109)/12,444 = 2.59 years

NPV = 2,570.69

IRR = 18.80%

Choose the first project

Discount rate 15.0000% Cash flows Year Discounted CF= cash flows/(1+rate)^year Cumulative cash flow         (214,952.00) 0                        (214,952.00)                     (214,952.00)            26,100.000 1                             22,695.65                     (192,256.35)            53,000.000 2                             40,075.61                     (152,180.73)            59,000.000 3                             38,793.46                     (113,387.28)         422,000.000 4                           241,279.87                       127,892.59

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