Tri Star, Inc., has the following mutually exclusive projects: YearProject A Project B0–$13100  –$8500 1 7300   3200 2 6300   2700 3 2,100   5100  Calculate the payback period for each project. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) If the appropriate discount rate is 9 percent, what is the NPV for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

Question
Asked Nov 11, 2019
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Tri Star, Inc., has the following mutually exclusive projects:
 

Year Project A   Project B
0 –$ 13100     –$ 8500  
1   7300       3200  
2   6300       2700  
3   2,100       5100  
 


Calculate the payback period for each project. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

 

If the appropriate discount rate is 9 percent, what is the NPV for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

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Expert Answer

Step 1

Calculation of Payback Period and Net Present Value:

The payback period for Project A is 1.92 years and for Project B is 2.51 years.

The net present value for Project A is $521.42 and for Project B is $646.45.

Excel Spreadsheet:...

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В C Е F G Н 1 Cash Flows Cumulative Cash Flows PV of Cash Flows FVIF@9% Year Project A Project B Project A ($13,100) (S8,500) ($13,100) $7.300 $6,300 Project A Project B (S13,100) (S8,500) $6,697.25 $2,935.78 $5,302.58 $2,272.54 S1,621.59 $3,938.14 Project B (S8,500) (S5,300) ($2,600) $2,500 2 3 0 1.0000 4 1 $3,200 (S5,800) $500 1.0900 5 2 $2,700 1.1881 $2,100 $5,100 6 $2,600 1.2950 Payback Period of Project A Payback Period of Project B Net Present Value of Project A Net Present Value of Project B 7 1.92 8 2.51 9 $521.42 10 $646.45

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