Problem:
Comparing two projects
Project A
cost of capital of 12%
life of project is 20 years
annual cash flow 350,000
initial cost 1,250,000
salvage value 250,000
project b
cost of capital of 12%
life of project is 20 years
annual cash flow 400,000
initial cost 1,400,000
salvage value 110,000
What is the payback period?
what is the npv of the the two projects?
what is the IRR of both projects?
What is the profitability index?
which of the two projects should be choosen and which criteria should be used to aid the decision?