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Thomas Company is considering two mutually exclusive projects. The firm has set a maximum 4 year payback requirement and a 12% cost of capital. The company has estimated its cash flows as shown in the following table:

Project A Project B

Initial Investment (CF0) $130,000 $85,000

Year (t) Cash inflows (CFt)

Project A Project B

1 $25,000 $40,000

2 35,000 35,000

3 45,000 30,000

4 50,000 10,000

5 55,000 5,000

a. find out the Payback Period for each project (para cada uno de los proyectos).

b. find out the NPV for each project (para cada uno de los proyectos), and assess its acceptability.

c. find out the Profitability Index for each project (para cada uno de los proyectos), and assess its acceptability.

d. Evaluate and discuss the rankings of the two projects on the basis of your findings in parts a, b and c. (Discuta y decida si los proyectos son o no aceptables bajo cada uno de los métodos utilizados en a, b y c).

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M947420

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