Which method is primary decision rule

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Reference no: EM131960857

Question: You are considering the following two competing mutually exclusive projects. Management team expects both projects can payback in 3 years. The required rate of return for both projects is 14.6%. Here are cash flows for each project:

Year Project A Project B

0 -$50,000 -$50,000

1 24,800 35,000

2 36,200 20,000

3 21,000 10,000

a. Calculate NPV for each project. If only NPV decision rule is used, which project should you accept and why?

b. Calculate IRR for each project. If only IRR decision rule is used, which project should you accept and why?

c. Calculate payback period for each project. If only payback period decision rule is used, which project should you accept and why?

d. Which method is primary decision rule? And ultimately, which project do you accept?

Reference no: EM131960857

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