Question
All techniques, conflicting rankings Nicholson Roofing Materials, Inc., is considering two mutually exclusive projects, each with an initial investment of $190,000. The company's board of
All techniques, conflicting rankings Nicholson Roofing Materials, Inc., is considering two mutually exclusive projects, each with an initial investment of $190,000.
The company's board of directors has set a 4-year payback requirement and has set its cost of capital at 8%.
The cash inflows associated with the two projects are shown in the following table:
a. Calculate the payback period for each project. Rank the projects by payback period.
b.Calculate the NPV of each project. Rank the project by NPV.
c.Calculate the IRR of each project. Rank the project by IRR.
d.Make a recommendation.
| Cash inflows (CF Subscript t) |
| ||
| Year | Project A | Project B | |
| 1 | $60,000 | $85,000 | |
| 2 | $60,000 | $50,000 | |
| 3 | $60,000 | $50,000 | |
| 4 | $60,000 | $50,000 | |
| 5 | $60,000 | $50,000 | |
| 6 | $60,000 | $50,000 | |
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Advanced Models And Tools For Effective Decision Making Under Uncertainty And Risk Contexts
Authors: Vicente González-Prida, María Carmen Carnero
1st Edition
1799832465,179983249X
