FINANCE 500-The CFO at Rabbit Corporation has asked you to
Question # 00469342
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Updated on: 01/24/2017 06:35 AM Due on: 01/24/2017
The CFO at Rabbit Corporation has asked you to analyze two proposed capital investments, Projects A and B. Each project has a cost of $10,000, and the cost of capital is 12% for each. The projects’ expected net cash flows are as follows:
year 0 | Project 1 (10,000) | Project 2 (10,000) |
1 | 6,500 | 3,500 |
2 | 3,000 | 3,500 |
3 | 3,000 | 3,500 |
4 | 1,000 | 3,500 |
- Calculate each project’s payback period.
- Calculate each project’s net present value (NPV).
- Calculate each project’s internal rate of return (IRR).
- Calculate each project’s profitability index (PI).
- Which project or projects should be accepted if they are independent?
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Solution: FINANCE 500-The CFO at Rabbit Corporation has asked you to