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

Project A Project B Year Cash Flow Cumulative Discount rate Total Cumulative 0 -357000 -357000 1 -357000 -357000 0 -46500 -46500 -46500 -46500 1 38000 -319000 0.877193 33333.33 -323667 1 23300 -23200 20438.6 -26061.4 2 58000 -261000 0.769468 44629.12 -279038 2 21300 -1900 16389.66 -9671.75 3 58000 -203000 0.674972 39148.35 -239889 3 18800 16900 12689.46 3017.719 4 433000 230000 0.59208 256370.8 16481.56 4 13900 30800 8229.916 11247.64 16481.56 11247.64 Payback Period Discounted Payback Period Project A = 3 Years+203000/433000 Project a = 3+239889/256370 Project A = 3+.47 Project A = 3+.94 Payback Period = 3.47 Years Project A = 3.94 Years 0.762188 Project B = 2 +9671.75/12689.46 Project B = 2+.76 Project B = 2.76 years 2 years+1900/18800 2+.10 = 2.10 Years Project B will be choosen If payback criteria is applied I will choose project B as it is having less payback period On the basis of NPV Project A will eb choosen as the project is having higher Net Present Value

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