What is the payback period for each project? (Do not round intermediate calculat

Question

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.)

What is the discounted payback period for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

What is the NPV for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

What is the IRR for each project? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

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.)

Explanation / Answer

Calculation of the payback period Project A Year Cash Flow Cumulative Cash Flow 0 -360000 -360000 1 35000 -325000 2 55000 -270000 3 55000 -215000 4 430000 215000 Payback Period = 3+215000/43000 Payback Period is 3.5 Years Project B Year Cash Flow Cumulative Cash Flow 0 -45000 -45000 1 23000 -22000 2 21000 -1000 3 18500 17500 4 13600 31100 Payback Period = 2+1000/18500 2.05 Years Payback Period Project A 3.5 Years Project B 2.05 Years Project B shall be choosen as it has less payback period b-1 Discounted Payback Period Project A Year Cash Flow Discount Net Cumulative 0 -360000 1 -360000 -360000 1 35000 0.877 30701.754 -329298.246 2 55000 0.769 42320.714 -286977.532 3 55000 0.675 37123.433 -249854.098 4 430000 0.592 254594.519 4740.421 Discounted Payback Period = 3+249854/254594 Payback Period is 3.98 Years Project B Year Cash Flow Discount Net Cumulative 0 -45000 1 -45000 -45000 1 23000 0.877 20175.439 -24824.561 2 21000 0.769 16158.818 -8665.743 3 18500 0.675 12486.973 3821.230 4 13600 0.592 8052.292 11873.522 Discounted Payback Period = 2+8665/12486 Discounted Payback Period is 2.70 Years Discounted Payback Period Project A 3.98 Years Project B 2.70 Years Project B shall be choosen as it has less dscounted payback period c 1 Calculation of the Net Present Value NPV = Present Value of cash inflows- cash outflows Project A NPV = 35000*.877+55000*.769+55000*.675+430000*.592-360000 30695+42295+37125+254560-360000 364675-360000 NPV = $4,675 Project B . NPV = 23000*.877+21000*.769+18500*.675+13600*.592-45000 20171+16149+12487+8051-11585 56858-45000 NPV = $11,858.70

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