My division is considering 2 investment projects, each which requires an upfront expenditure of $25 million. I
estimate the cost of capital is 10% and that the investments will produce the following after tax cash flows (in millions of dollars).
– What is the regular payback period for each of these projects?
– What is the discounted payback period for each of these projects?
– If the projects are mutually exclusive and the cost of capital is 10%, which project or projects would you undertake?
– If the projects are independent and the cost of capital is 10%, which project should the firm undertake?
– Based on the profitability index (PI), what is your recommendation concerning these projects if these projects are independent?