Find the payback only for project abc

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Reference no: EM132571320

           Project ABC                Project XDA

Year        Cash flow               Cash flow

0              -$185,000             -$195,000

1                 $90,000                $ 95,000

2            $97,500                        $ 48,000

3                $25,000                      $ 35,000

4                $40,000                    $ 80,000

Required payback period 2.5 years

Required AAR 7.25 percent

Required return 9.00 percent

Question A) Calculate the IRR for both projects. If these two are mutually exclusive projects, based on IRR, which project would you accept? Is the decision based on IRR always correct? Explain.

Question B) At which discount rate, would you be indifferent between these two projects?

Question C) Find the payback ONLY for project ABC. Round to 2 decimal places. Make the decision based on this criterion and justify your answer.

Reference no: EM132571320

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