A firm is trying to choose between 3 investments, all have a cost of capital of 12%.
Year
Project 1
Project 2
Project 3
Initial outlay
$200,000
200,000
1
$ 70,000
55,000
2
60,000
55,000
3
50,000
55,000
40,000
55,000
60,000
55,000
45
200,000
10,000
20,000
0
0
310,000
Calculate NPV and IRR for each, then tell which project should be chosen based on it.
Calculate Profitability index for each and tell me which to choose.
Calculate Payback period for each. Which project will be paid off the soonest?