Question
6. You have joined the Projects division of Grow More Inc. Your first job is to analyze two projects, which have you code named
6. You have joined the Projects division of Grow More Inc. Your first job is to analyze two projects, which have you code named alpha and beta. Both projects will require the same initial investment of $100,000 and are expected to generate the following cash flows over an expected economic life of 4 years. Project "alpha" Project "beta" Year $ $ 70,000 40,000 32,000 40,000 3 32,000 40,000 4 9,000 40,000 Assuming that GrowMore Inc.'s cost of capital for these projects is 10 percent a) Calculate its (1) payback period, and (2) discounted payback period. Which project would you select under these methods? Explain your an- swer. b) Calculate net present value for each project and indicate which one you would undertake using this decision rule. c) Calculate internal rates of return for each project. Which project would you select using the IRR rule? (Write down the equations to calculate the IRR for these projects and use Spreadsheet for find IRR's.)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started