Bascilla, Incorporated is trying to determine the value of several projects. Currently there are four being examined:
Project	Automation	Hire Extra Crew	Acquire a Supplier	Purchase Latest Model of Equipment
Initial Cost	$650,000	$91,000	$1,200,000	$435,000
Salvage Value	$90,000	N/A	N/A	$133,000
Annual Increase to Net Income	$64,000	$17,000	$46,000	$46,000
Project Life (years)	10	15	20	8
Hurdle Rate	12%
Automation requires a working capital amount to begin which will be released at year 10.	$25,000
The equipment will require a major repair at year 4.	$48,000
Required:
Compute the Net Present Value of each project.
Examine the Internal Rate of Return for each project.
Compute the Profitability Index for all projects.
Use the PV() function to determine the TVM factors. Be sure to put a "-" sign before the function and for cash out flows, and use "1" as the PMT and FV amounts as necessary.
Automation
Event	Amount	Factor	NPV
Initial Cost		1.000000
Net Income (annual)
Depreciation Expense (annual)
Working Capital
Salvage Value
		NPV
Hire Extra Crew
Event	Amount	Factor	NPV
Initial Cost		1.000000
Net Income (annual)
		NPV
Acquire a Supplier
Event	Amount	Factor	NPV
Initial Cost		1.000000
Net Income (annual)
		NPV
Purchase Latest Model of Equipment
Event	Amount	Factor	NPV
Initial Cost		1.000000
Net Income (annual)
Depreciation Expense (annual)
Repair at year 4
Salvage Value
		NPV
Which project's IRR is closest to the Hurdle Rate?
Which project has an IRR lower than the Hurdle Rate?
Use the SUM() function in the calculated NPV charts and the Initial Cost in the original data to compute Profitability Index.
Project	Automation	Hire Extra Crew	Acquire a Supplier	Purchase Latest Model of Equipment
Profitability Index
Based on NPV alone, which project is best?
Based on Profitability Index alone, which project is best?