1. Assume a $100,000 investment and the following cash flows for two alternatives.
Investment A Investment B
Year
1
$30,000
$40,000
2
50,000
30,000
3
20,000
15,000
4
60,000
15,000
5
50,000
a. Which of the two alternatives would you select under the payback method?
b. Assume a discount rate of 6%, determine discounted payback period. Investment
A and Investment B. Which project would you choose?
c. Determine NPV of the Investments based on a 9% discount rate.
d. If the 2 Investments are not mutually exclusive, what would your acceptance or
rejection decision be if cost of capital is 8%.
e. If the 2 Investments are mutually exclusive, what would your decision be if the
cost of capital is 10%.