Comparing Investment Criteria [LO1, 2, 3, 5, 7] Consider the following two mutua

Question

Comparing Investment Criteria [LO1, 2, 3, 5, 7] Consider the following two mutually exclusive projects: Whichever project you choose, if any, you require a 15 percent return on your investment. If you apply the payback criterion, which investment will you choose? Why? h. If you apply the discounted payback criterion, which investment will you choose? Why? If you apply the NPV criterion, which investment will you choose? Why? If you apply the IRR criterion, which investment will you choose? Why? If you apply the profitability index criterion, which investment will you choose Why? Based on your answers in (a) through (e), which project will you finally choose Why?

Explanation / Answer

(A) Payback of A= 3+[(300000-120000)/390000]= 3.462 years PAy back of B= 2+[(40000-31000)/18000]= 2.5 years Since PAy back of B is less than A, project B is chosen. Please note that multiple questions are not allowed to be posted in a single post. Please post the other parts in a new post.

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