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Unformatted text preview: Year Cash Flow (I) $ Cash Flow (II) $ 0 72,000 30,000 1 27,000 9,000 2 32,000 19,500 3 38,000 13,500 a. If the required return is 11 percent and the company applies the profitability index decision rule, which project should the firm accept? b. If the company applies the NPV decision rule, which project should it take? c. Explain why your answers in (a) and (b) are different. 8.21 (263) NPV and Payback Period . Kaleb Konstruction, Inc. has the following mutually exclusive projects available. The company has historically used a threeyear cutoff for projects. The required return is 10 percent. (Continued on back) Year Project F $ Project G $ 0 125,000 195,000 1 65,000 45,000 2 55,000 60,000 3 55,000 85,000 4 50,000 115,000 5 45,000 130,000 a. Calculate the payback period for both projects. b. Calculate the NPV for both projects. c. Which project, if any, should the company accept?...
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 Fall '08
 Staff
 Net Present Value, Internal rate of return

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