Consider the following two projects: cash flows Project A Project B c0 -270 -2170 c1 115 143 c2 115 143 c3 115 143 c4 115 a. If the opportunity cost of capital is 10%, which of these 2 projects would you accept? b. Suppose that you can choose only one of these two projects. Which would you choose? The discount rate is still 10%. c. Which one would you choose if the cost of capital is 15%? d. What is the payback period for every project? e. Is the project with the shortest payback period also the one with the highest NPV? f. What are the internal rate of return on the two projects? g. Does the IRR rule in this case gives the same answer as NPV? h1. If the opportunity cost of capital is 10%, whats is the profitability index for each project? h2. Is the project with the highest profitability index also the one with the highest NPV? h3. Which measure should you use to choose between the two projects?
Consider the following two projects:
cash flows Project A Project B
c0 -270 -2170
c1 115 143
c2 115 143
c3 115 143
c4 115
a. If the
b. Suppose that you can choose only one of these two projects. Which would you choose? The discount rate is still 10%.
c. Which one would you choose if the cost of capital is 15%?
d. What is the payback period for every project?
e. Is the project with the shortest payback period also the one with the highest NPV?
f. What are the
g. Does the IRR rule in this case gives the same answer as NPV?
h1. If the opportunity cost of capital is 10%, whats is the profitability index for each project?
h2. Is the project with the highest profitability index also the one with the highest NPV?
h3. Which measure should you use to choose between the two projects?
Trending now
This is a popular solution!
Step by step
Solved in 8 steps with 6 images
