EXERCISE TOPIC 5.docx - QUESTION 1 FI Industries is in the process of choosing the better of two equal-risk mutually exclusive capital expenditure

EXERCISE TOPIC 5.docx - QUESTION 1 FI Industries is in the...

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QUESTION 1 FI Industries is in the process of choosing the better of two equal-risk, mutually exclusive capital expenditure projects; Project A and Project B. The relevant cash flows for each project are given below. The firm's cost of capital is 14%. Project A Project B Initial Investment $28,500 $27,000 YEAR CASH INFLOWS ($) 1 10,000 11,000 2 10,000 10,000 3 10,000 9,000 4 10,000 8,000 a. Calculate each project's payback period.
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Unformatted text preview: b. Calculate each project's discounted payback period. c. Calculate the net present value (NPV) for each project. d. Calculate the profitability index (PI) for each project. e. Calculate the internal rate of return (IRR) for each project. Summarize the preferences dictated by each measure and indicate which project you would recommend. Explain why....
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  • Spring '16
  • Allan Mesina

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