Your company is considering the following two projects. The more expensive of the two is better and will produce a higher yield. Assume they are mutually exclusive and the required rate of return is 10% Project A Project B Initial Outlay -500 -5,000 inflow Year 1 700 6,000 1) What is the NPV of A? OF B? 2) What is the PI of A? OF B? 3) What is the IRR of A? OF B? 4) If there is no capital rationing constraint, which project should be selected? 5) If there is a capital rationing constraint, how should be decision be made?

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