What reinvestment rate assumptions are implicitly made

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Reference no: EM13298011

Provide an evaluation of the given two projects. Required rate of return 12%

Project A Project B
Initial Outlay -110000 -110000
Year 1 20000 40000
Year 2 30000 40000
Year 3 40000 40000
Year 4 50000 40000
Year 5 70000 40000

Questions:

1. Describe the logice behind Net present value
2. Would you expect the net present value and profitabilty index methods to give
consistent accept reject decisions?Why or Why not?
3. What reinvestment rate assumptions are implicitly made by the net present value and the internal rate of return methods? Which method is better?

Reference no: EM13298011

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