Investment proposals A and B require initial investments of $45,000 and $35,000, respectively. Both have an economic life of four years with no residual value. Their expected profits are as follows:

If the firm's cost of capital is 14%, rank the proposals based on their:
a) NPVs.
b) IRRs.
c) Payback periods.

Question

Investment proposals A and B require initial investments of $45,000 and $35,000, respectively. Both have an economic life of four years with no residual value. Their expected profits are as follows: 
  
If the firm's cost of capital is 14%, rank the proposals based on their:
a) NPVs.
b) IRRs. 
c) Payback periods.

Quizplus · Accepted Answer

The Answer of Investment proposals A and B require initial investments of $45,000 and $35,000, respectively. Both have an economic life of four years with no residual value. Their expected profits are as follows: 
  
If the firm's cost of capital is 14%, rank the proposals based on their:
a) NPVs.
b) IRRs. 
c) Payback periods.

Investment Proposals a and B Require Initial Investments of $45,000