What is the payback period for investments

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Reference no: EM131991230

Use the following investment scenarios and corresponding cash flows to answer the questions

Investment 1 has the following profile:

Cost of Capital = 9.5%

Initial investment = $950,000

Year 1 cash flow = $300,000 Year 2 cash flow = $200,000 Year 3 cash flow = $200,000 Year 4 cash flow = $600,000 Year 5 cash flow = $500,000

Investment 2 has the following profile:

Cost of Capital = 9.5%

Initial Investment = $950,000

Year 1 cash flow = $400,000 Year 2 cash flow = $400,000 Year 3 cash flow = $500,000 Year 4 cash flow = $150,000 Year 5 cash flow = $150,000

What is the payback period for Investments 1 and 2?

What is the discounted payback period for Investments 1 and 2?

What is the net present value of Investments 1 and 2?

What is the profitability index of investments 1 and 2?

What is the internal rate of return for investments 1 and 2?

Which investment would you choose and why?

Would you choose a different option if the cost of capital was 18%?

Reference no: EM131991230

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