Caledonia problem - 0 = -100000 + 200000(1+r) pwr 5 R =...

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12 a Payback period is the time in which the whole project cost is recovered. Project A = 100000/32000 = 3.125 year Project B = 4.5 years b NPV 5 Project A = -100000 + ∑ 32000 (1.15) pwr t = $18268 T=0 Project B = -100000 + 200000(1.15) pwr 5 = -$564 c IRR 5 Project A 0 = -100000 + ∑ 32000 (1+r) pwr t T=0 R = 18.03% Project B
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Unformatted text preview: 0 = -100000 + 200000(1+r) pwr 5 R = 14.87% d Ranking conflict is caused because Project A generates the cash flow consistently throughout the project life whereas Project B generates it only at the end of project life. e Project A should be accepted because it has positive NPV and higher IRR....
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