Unformatted text preview: 56,000 5 41,000 97,000 SCENARIO: Yabba Dabba Do Inc. can invest $55,000 in two mutually exclusive projects--A or B--but not both. Its cost of capital is 6%. Solve for NPV, IRR, PI, payback, and ARR, select the better project, and state why. [TO VIEW OR HIDE THE EXCEL COMMENTS, CLICK REVIEW, SHOW ALL COMMENTS]. Annual Depreciation (initial investment - salvage value)/5 Less initial investment T (Today) (minus $) Annual Depreciation (initial investment - salvage value)/5 Less initial investment T (Today) (minus $) Decision [Select the better project and explain why]. A is selected because NPV, IRR, PI, are higher than B and the payback for A is shorter than for B. ARR is the same because the total accounting income and initial investment are the same for both projects. Author: Use the Excel Fx function =NPV and enter the interest rate, and the range of cash inflows, excluding the initial investment....
View Full Document
- Spring '11
- Net Present Value, $6,400, $4,400, $12,400, $10,400