Assignment 5: Calculate Payback Period, Net Present Value, and Internal Rate of Return

Yellow Company has two mutually exclusive investment opportunities (they can only invest in either A or B, not both). The company has a desired rate of return of 10%. Both investments cost $17,000 and will provide the following net cash flows:

Year	Investment A	Investment B
1	7,000	9,000
2	7,000	8,000
3	7,000	6,000
4	7,000	5,000

A. Calculate the payback period for each investment.

Investment A

Investment B

B. Which investment provides the better payback period? Why?

C. Calculate the net present value for each project.

Investment A

Investment B

D. Which project provides the better net present value? Why?

E. Calculate the internal rate of return for each project.

Investment A

Investment B

F. Which project provides the better internal rate of return? Why?