B1) Using financial calculator to calculate Npv of both projects.
Cashflow 1
Inputs: C0= - 84,000
C1= 30,600. Frequency= 1
C2= 36,900. Frequency= 1
C3= 43,700. Frequency= 1
I = 11%
Npv = compute
We get, Npv of Cashflow 1 as $5,469.50
Cash flow 2
Inputs: C0= -29,800
C1= 10,500. Frequency= 1
C2= 17,400. Frequency= 1
C3= 15,600. Frequency= 1
I= 11%
Npv= compute
We get, Npv of Cash flow 2 as $5,188.28
b2) On the basis on Npv we will choose cashflow1 as it gives us higher Npv.
A1) profitability index of cashflow 1
= Npv + Intial investment / initial investment
= 5,469.50 + 84,000 / 84,000
= 89,469.50 / 84,000
= 1.065
Profitability index of cashflow 2
= Npv + initial investment / initial investment
= 5,188.28 + 29,800 / 29,800
= 34,988.28 / 29,800
= 1.17
A2) As per profitability index we will choose cashflow 2 , because it has higher profitability index.
Homework Seved The Whenworth Corporation is trying to choose between the following two mutually exclusive design...
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