Basic capital Budgeting homwwork ;    Year                      Project A                    Project B      0                         -100000                     -120000      1                           5000                          118000       2                          55000                         69000       3                          135000 Please calculate the 1) Payback period 2) Discounted payback period 3) Net present value 4) Internal rate of return 5) Modified internal rate of return 6) Cross over rate  If the projects are independent which project should be selected

1) Payback period ;

• Project A = 2.30 years
• Project B = 1.03 years

2) Discounted payback period ;

• Project A = 2.45 years
• Project B = 1.18 years

3) Net present value ;

• Project A = 58,950.62
• Project B = 48,415.64

4) Internal rate of return ;

• Project A = 28.91%
• Project B= 39.54%

5) Modified internal rate of return ;

• Project A = 26.04%
• Project B = 27.95%

6) Cross over rate = 14.94%

If the projects are independent the project A & project B both should be accepted because they both have positive NPV, IRR & MIRR is higher than the cost of capital.

If the projects are mutually exclusive the project that have lowest payback period should be accepted,. So, the project B should be accepted because it has lowest payback period.

If the projects are mutually exclusive the project that have Highest NPV should be accepted,. So, the project A should be accepted because it has highest NPV.

If the projects are mutually exclusive the project that have Highest IRR should be accepted,. So, the project B should be accepted because it has highest IRR.

If the projects are mutually exclusive the project that have Highest MIRR should be accepted,. So, the project B should be accepted because it has highest MIRR. 

The NPV method is best method to accept the project because it depends on time value of money. So, the project A should be accepted because it has highest NPV.