Caledonia is considering two investments with one-year, Ask an Expert

Management Studies

Caledonia is considering two investments with one-year lives. The more expensive of the two is the better and will produce more savings. Assume these projects are mutually exclusive and that the required rate of return is 10 percent. Given the following after-tax net cash flows:

YEAR PROJECT A PROJECT B

0 -$195,000 -$1,200,000

1 240,000 1,650,000

a. find out the net present value.

b. find out the profitability index.

c. find out the internal rate of return.

d. If there is no capital-rationing constraint, which project should be selected? If there is a capital-rationing constraint, how should the decision be made?

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Business Management, Management Studies

Category:- Business Management
Reference No.:- M9110689

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