2 POTENTIAL CAPITAL PROJECTS HAVE THE FOLLOWING ESTIMATED CASHFLOWS

PROJECT 1 PROJECT 2

YEAR CASHFLOW CASHFLOW

1 $95,000 $112,000

2 $150,000 $95,000

3 $1,000 $85,000

4 $12,000 $65,000

5 $45,000 $10,000

6 $198,000 $15,000

BOTH PROJECTS HAVE A COST OF $300,000. THE COST OF CAPITAL IS 9.5%

A. CALCULATE THE PAYBACK FOR EACH PROJECT. STATE IF THE PROJECT IS ACCEPTABLE UNDER PAYBACK AND WHY.

B. CALCULATE THE NPV FOR EACH PROJECT. STATE IF THE PROJECT IS ACCEPTABLE UNDER NPV AND WHY.

C. CALCULATE THE IRR FOR EACH PROJECT. STATE IF THE PROJECT IS ACCEPTABLE UNDER IRR AND WHY.

D. CALCULATE THE PI FOR EACH PROJECT. STATE IF THE PROJECT IS ACCEPTABLE UNDER PI AND WHY.

E. STATE WHICH IS THE BEST PROJECT OVERALL AND WHY.