Moulton Industries has two potential projects for the coming year, Project B-12 and Project F-4. If the firm is assuming a 10% discount rate, which project has a higher NPV?
Cash Flow |
Project B-12 |
Project F-4 |
Year 0 |
-$4,250,000 |
-$3,800,000 |
Year 1 |
$2,000,000 |
$ 0 |
Year 2 |
$2,000,000 |
$1,000,000 |
Year 3 |
$2,000,000 |
$1,500,000 |
Year 4 |
$ 0 |
$2,000,000 |
Year 5 |
$ 0 |
$2,500,000 |
A. If an independent decision criterion is used regarding Project B-12 and Project F-4, which projected should be selected?
B. If a mutually exclusive decision criterion is used regarding Project B-12 and Project F-4, which project should be selected?
C. Calculate the profitability index for Project B-12 and Project F-4
D. What is each project’s payback period?
