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Group ProjectFINA 3311 Sec:205Financial management principlesFaten AlNassar :201302248Sarah al-Ansari:201300738Alhanoof Alotaibi: 201201928 Project A Project B Initial outlay 110,000 110,000 Year 1 20,000 40,000 Year 2 30,000 40,000 Year 3 40,000 40,000. Year 4 50,000 40,000 Year 5 70,000 40,000 Part I -2Net present value : Project A:CFO -110,000CO1
20,000F1 1CO2  30,000F2  1CO3  40,000F3 = 1CO4  50,000F4 = 1CO5 = 70,000F5 = 1NPV=31,739.9  (Accept)IRR= 20.969  (Accept)PI= = 1.29  PI = 1.29 < 1 Accept​​​​​ Payback Period A: Year Project A Cumulative Cash Flow 0 (110,000) (110,000) 1 20,000 (90,000) 2 30,000 (60,000) 3 40,000 (20,000) 4 50,000 30,000 5 70,000 100,000   Payback+3=3.4years (reject) Project B:CFO  -110,000 ​​​​​ CO1 = 20,000​​​​​​CO1 = 40,000F1  5NPV=34.191.048 (Accept)IRR=23.919  (Accept)PI= 1.311  PI = 1.311 < 1 Accept​Payback period=  =2.75 year (Accept )Only Project B is accepted because it has payback period of less than three years.Part 3 Mutually Exclusive (Ranking) Net Present Value Internal Rate of Return Payback Period Profitability Index Project A Second Second Second Second Project B First First First First Decision: Accept Project B Accept Project B Accept Project B Accept Project B Reject Project A Reject Project A Reject Project A Reject Project A Project B should be accepted and project A should be eliminated because both projects are mutually exclusive.Project B has higher NPV, IRR and PI. Moreover, payback period was 2 years and 7 months, which is less than 3 years.