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FIN 325 Ch. 8 Practice Exercise Your firm is evaluating 4 projects (A-D) with...

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Accounting

FIN 325 Ch. 8 Practice Exercise

Your firm is evaluating 4 projects (A-D) with the following estimated CFs. The required return for all projects is 10%.

Year CF(A) CF(B) CF(C) CF(D)
0 -1000 -1200 -2000 -4000
1 200 0 350 500
2 400 300 750 1000
3 600 600 1150 2000
4 800 900 1500 3000
5 0 1000 0 0

1. Find the NPV, IRR, Payback Period, and Profitability Index for all 4 projects?

2. If the projects are mutually exclusive and only one can be selected, which should the firm choose?

3. A the firm is free to choose any combination of projects, but has a budget limit of $4000, which combo should they choose?

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