(NPV, Profitability Index, IRR) Criterion Sales is considering three alternative investment proposals but can accept only one of these. The investments and cash flows are shown below:
|
Cash Flows |
Year 0 |
Year! |
Year 2 |
Year 3 |
Year 4 |
|
Project A |
|||||
|
Cash inflows |
$(150,000) |
$50,000 |
$75,000 |
$75,000 |
$50,000 |
|
Project B |
|||||
|
Cash inflows |
(200,000) |
75,000 |
75,000 |
75,000 |
75,000 |
|
Project C |
|||||
|
Cash inflows |
(300,000) |
50,000 |
100,000 |
150,000 |
100,000 |
Compare for each alternative investment the
- Net present value
- Profitability index
- Internal rate of return
Which of the three investment proposals would you prefer and why?