15 Feb A firm is considering two projects with the following cash flows. The required return for both projects is 20 percent. Year Project H Year Project I 0 -$750,000 0 -$375,000 1 400,
Question 3) A firm is considering two projects with the following cash flows. The required return for both projects is 20 percent.
Year
Project H
Year
Project I
0
-$750,000
0
-$375,000
1
400,000
1
250,000
2
450,000
2
175,000
3
350,000
3
105,000
Required:
a. Calculate the NPV & IRR for both projects. (8 marks)
b. Calculate the payback periods (including the fraction of a year) for both projects. (3 marks)
c. Calculate the profitability index of both projects. (3 marks)
d. Based on the above calculations, which project or projects should the firm choose if the projects are:
Independent. Explain
Mutually exclusive. Explain
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