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A company is considering two equally risky mutually exclusive projects. The relevant cash flows are as follows:

Period Project A Project B

0 -$285,000 -$270,000

1 100,000 110,000

2 100,000 100,000

3 100,000 90,000

4 100,000 80,000

i. Calculate the Net Present Values for project A and project B assuming the company’s required rate of return is 14%. Which project should the company choose?

ii. Calculate the profitability index for project A and project B.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92426767

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