Thoroughbred Dog Food Company is considering the following two mutually exclusive projects: mlp86

The management of Thoroughbred Company believes the required rate of return for Project A is 8%, but a 2% premium is added to the required rate of return for Project B because it is considered to be a higher-risk project.
Required:
Compute the net present value and discounted payback period for Projects A and B using the appropriate required rate of return and determine which project is more attractive.

Transcribed Image Text:

Project A Project B Initial net cash outlay $200,000 $280,000 Cash flow from operations: Year 1 60,000 100,000 Year 2 60,000 80,000 Year 3 60,000 70,000 Year 4 60,000 60,000 Year 5 60,000 40,000