a. The payback period of project A is years. (Round to two decimal places.) The payback period of project B is years. (Round to two decimal places.) b. The NPV of project A is $. (Round to the nearest cent.) The NPV of project B is $ (Round to the nearest cent.) c. The IRR of project A is%. (Round to two decimal places.) The IRR of project B is%. (Round to two decimal places.) d. Which project will you recommend? (Select the best answer below.) A. Project B B. Project A
a. The payback period of project A is years. (Round to two decimal places.) The payback period of project B is years. (Round to two decimal places.) b. The NPV of project A is $. (Round to the nearest cent.) The NPV of project B is $ (Round to the nearest cent.) c. The IRR of project A is%. (Round to two decimal places.) The IRR of project B is%. (Round to two decimal places.) d. Which project will you recommend? (Select the best answer below.) A. Project B B. Project A
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 15P
Related questions
Question
![All techniques with NPV profile-Mutually exclusive projects Projects A and B, of equal risk, are alternatives for
expanding Rosa Company's capacity. The firm's cost of capital is 12%. The cash flows for each project are shown in
the following table:
a. Calculate each project's payback period.
b. Calculate the net present value (NPV) for each project.
c. Calculate the internal rate of return (IRR) for each project.
d. Indicate which project you would recommend.
GICKER
a. The payback period of project A is years. (Round to two decimal places.)
The payback period of project B is years. (Round to two decimal places.)
b. The NPV of project A is $. (Round to the nearest cent.)
The NPV of project B is $. (Round to the nearest cent.)
c. The IRR of project A is%. (Round to two decimal places.)
The IRR of project B is%. (Round to two decimal places.)
d. Which project will you recommend? (Select the best answer below.)
OA. Project B
OB. Project A](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd977dd65-68a6-4103-b2eb-7ca4e0687db8%2F73feb4ef-ee6d-48de-9974-52444f8c670d%2Fejdglpg_processed.jpeg&w=3840&q=75)
Transcribed Image Text:All techniques with NPV profile-Mutually exclusive projects Projects A and B, of equal risk, are alternatives for
expanding Rosa Company's capacity. The firm's cost of capital is 12%. The cash flows for each project are shown in
the following table:
a. Calculate each project's payback period.
b. Calculate the net present value (NPV) for each project.
c. Calculate the internal rate of return (IRR) for each project.
d. Indicate which project you would recommend.
GICKER
a. The payback period of project A is years. (Round to two decimal places.)
The payback period of project B is years. (Round to two decimal places.)
b. The NPV of project A is $. (Round to the nearest cent.)
The NPV of project B is $. (Round to the nearest cent.)
c. The IRR of project A is%. (Round to two decimal places.)
The IRR of project B is%. (Round to two decimal places.)
d. Which project will you recommend? (Select the best answer below.)
OA. Project B
OB. Project A
![All techniques with NPV profile-Mutually exclusive projects Projects A and B of
X
Data table
(Click on the icon here in order to copy the contents of the data table below
into a spreadsheet.)
Initial investment
(CFO)
Year (1)
1
OB. Project A
2345
Print
Project A
00,000
Cash inflows (CF₂)
$50,000
$55,000
$60,000
$65,000
$70,000
Project B
$160,000
Done
$50,000
$50,000
$50,000
$50,000
$50,000
-](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd977dd65-68a6-4103-b2eb-7ca4e0687db8%2F73feb4ef-ee6d-48de-9974-52444f8c670d%2Frnubski_processed.jpeg&w=3840&q=75)
Transcribed Image Text:All techniques with NPV profile-Mutually exclusive projects Projects A and B of
X
Data table
(Click on the icon here in order to copy the contents of the data table below
into a spreadsheet.)
Initial investment
(CFO)
Year (1)
1
OB. Project A
2345
Print
Project A
00,000
Cash inflows (CF₂)
$50,000
$55,000
$60,000
$65,000
$70,000
Project B
$160,000
Done
$50,000
$50,000
$50,000
$50,000
$50,000
-
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