Expected Net Cash Flows Year Project A Project B 0

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Expected Net Cash Flows
Year Project
A Project
B
0
- $145


-$295
1

85
120
2

75
165
3

90
140
Both of the projects have a cost of capital of 8 percent.
1a. What is Project
A's and Project B’s discount payback (DPB)? (10 points)
DPB for A = ____________.
DPB for B = ______________.
1b. What is the profitability index (PI) for Both
Projects? (10 points)
Profitability Index for A = ____________.
Profitability Index for B = _____________.
1c. What is the internal
rate of return for Both Projects? (10 points)
IRR for Project A = _____________.
IRR for Project B = ______________.
1d. Based on your findings above, what should the company do if
both projects are independent to each other? Why? What if both
projects are mutually exclusive? (10 points)
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