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PLEASE ANSWER A-D WITH WORK, THANK YOU! 2. Consider the following two mutually exclusive projects: Year Cash Flow...

PLEASE ANSWER A-D WITH WORK, THANK YOU!

2. Consider the following two mutually exclusive projects:

Year

Cash Flow A

Cash Flow B

0

$-318,844

$-27,476

1

$27,700

$9,057

2

$56,000

$10,536

3

$55,000

$11,849

4

$399,000

$13,814

The required return is 15 percent for both projects.

  1. Based on NPV rule, Reject or Accept?
  2. Based on IRR rule, Reject or Accept?
  3. Based on PI, Accept or Reject?
  4. Which rule in this case would be preferred?
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Answer #1

mi : x v fx A B C D E F G H I J K M N O P A 2 3 a. Project A Project 1 Year Year O Cash Flows PV Factor @ 15% PV of Cash Flow

M18 * for A B C D E F G H J J K L M N O P A 19 b. IRR At 15% NPV = $11,879.94 NPV = $4,055.49 At 25% Year Year Cash Flows ($)

M37 : X for A B C D E F G H I J K K L M N O P a Project A = 0.15+[11,879.94*(0.25-0.15)/(11,879.94-(-69,253.60))] = 0.15+[11,

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