Calculate the payback periods

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Reference no: EM131016883

Trying to understand step by step on how to do the below problem:

Bumble's Bees, Inc. has identified the following two mutually exclusive projects:

Year

Project A

Project B

0

$17,000

$17,000

1

8,000

2,000

2

7,000

5,000

3

5,000

9,000

4

3,000

9,500

  • What is the IRR for each of the projects? If you apply the IRR decision rule, which project should the company accept?
  • If the required rate is 11 percent, what is the NPV for each of the projects? Which project will you choose if you apply the NPV rule?
  • Calculate the payback periods. Which project will you choose if you apply the Payback Period rule?
  • Calculate the Profitability Indexes. Which project will you choose if you apply the Profitability Index rule?
  • What is you final decision? Explain.

Reference no: EM131016883

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