Consider the following two mutually exclusive projects: Year Cash Flow (X) Cash Flow (Y) 0 -$365,000 -$38,000 1 25,000 16,000 2 65,000 12,000 3 65,000 17,000 4 425,000 15,000 Whichever project you choose, if any, you require a 13 percent return on your investment. i. Which investment will you choose if you use the payback decision criteria? Justify your answer. ii. Which investment will you choose if you use the NPV decision criteria? Justify your answer. iii. Which project will you choose ultimately based on your answers above?
Consider the following two mutually exclusive projects:
Year Cash Flow (X) Cash Flow (Y)
0 -$365,000 -$38,000
1 25,000 16,000
2 65,000 12,000
3 65,000 17,000
4 425,000 15,000
Whichever project you choose, if any, you require a 13 percent return on your investment.
i. Which investment will you choose if you use the payback decision criteria?
Justify your answer.
ii. Which investment will you choose if you use the NPV decision criteria? Justify
your answer.
iii. Which project will you choose ultimately based on your answers above?
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