Consider the following two mutually exclusive projects:
Year Cash Flow (A) Cash Flow (B)
0 $433,000 $44,000
1 40,000 21,200
2 66,000 12,500
3 83,000 22,600
4 548,000 19,400
The required return on these investments is 14 percent. Required:
(a) What is the payback period for each project? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).) Payback period Project A years Project B years
(b) What is the NPV for each project? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).) Net present value Project A $ Project B $
(c) What is the IRR for each project? (Do not round intermediate calculations. Enter your answers as a percentage rounded to 2 decimal places (e.g., 32.16).) Internal rate of return Project A % Project B %
(d) What is the profitability index for each project? (Do not round intermediate calculations. Round your answers to 3 decimal places (e.g., 32.161).) Profitability index Project A Project B
(e) Based on your answers in (a) through (d), which project will you finally choose?