A&B Enterprises Is Trying to Select the Best Investment from Among

question 61

Essay

A&B Enterprises is trying to select the best investment from among four alternatives. Each alternative involves an initial outlay of $100,000. Their cash flows follow:
Evaluate and rank each alternative based on a) payback period, b) net present value (use a 10% discount rate), and c) internal rate of return.
A) Payback period
Based on payback period, our choice is B.
B) Net present value (NPV)
PV of Inflows @ 10%
Based on net present value analysis, our first choice is D, followed by A, then
B. We would not select alternative C.
C) Internal rate of return (IRR)

• A) Payback period Based on payback period, our choice is B.
• B) Net present value (NP
• V) PV of Inflows @ 10% Based on net present value analysis, our first choice is D, followed by A, then B. We would not select alternative C.
• C) Internal rate of return (IR

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Definitions:

Archaea

A category of single-celled organisms, distinct in genetics from both bacteria and eukaryotes, frequently located in environments of extreme conditions.

Extrinsic Postzygotic

Refers to factors external to the zygote that affect the survival and reproduction of hybrids between different species, populations, or genetic backgrounds.

Genetic Drift

A mechanism of evolution where random changes in the frequency of alleles within a population occur, often having a significant impact on smaller populations.