Caledonia is considering two additional mutually exclusive projects. The cash flows associated with these projects are as

Question:

Caledonia is considering two additional mutually exclusive projects. The cash flows associated with these projects are as follows:

The required rate of return on these projects is 11 percent.
a. What is each project€™s payback period?
b. What is each project€™s net present value?
c. What is each project€™s internal rate of return?
d. What has caused the ranking conflict?
e. Which project should be accepted? Why?
f. Describe the factors that Caladonia would have to consider if they were doing a lease versus buy for the two projects.

Net Present Value
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at...