Mutually-exclusive business opportunities

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The following two mutually-exclusive business opportunities are currently under consideration by your firm, The Sharper Investor. The accounting department has forecasted pro forma cash flows for both projects according to the following table:  (each project is to be funded to require a discount rate of 15%)

Year        Cash Flow (A)       Cash Flow (B)   _

0          -$525,000           -$60,000

1             30,000             30,000

2             75,000             15,000

3             75,000              9,000

4          1,125,000              3,000

1. Discounted payback of Project A (above) equals:

a. 3.61 years b. 3.31 years c. 4.0 years d. 3.47 years

2. What is Project A's Internal Rate of Return (SHOW ALL WORK)?

a. 28.37% b. 27.49% c. 27.94% d. 29.13% e. 26.99%

3. The Profitability Index for Project B equals?

a. -$14,938 b. .9500 c. 1.3316 d. .7510 e. .8854

What is the crossover rate between projects A and B? (place answer here:____________ SHOW WORK on scratch sheet)

Reference no: EM131933135

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