Cash Flows for project A

Cash Flows for project B

Initial Investments

$ 150,000.00

Discount Rate

Present value

Initial Investment

$300,000.00

Discount Rate

Present Value

Year

Project A

13.50%

Year

Project B

13.50%

0

-150000

1.00

-150000

0

-300000

1.00

-300000

1

40,000.00

0.135

$35,242.29

1

84,000.00

0.135

74,008.81

2

43,400.00

0.135

$33,689.77

2

92,400.00

0.135

71,726.60

3

47,140.00

0.135

$32,240.52

3

101,640.00

0.135

69,514.77

4

51,254.00

0.135

$30,884.77

4

111,804.00

0.135

67,371.14

5

55,779.40

0.135

$29,613.83

5

122,984.40

0.135

65,293.62

6

60,757.34

0.135

$28,419.97

6

135,282.84

0.135

63,280.16

7

66,233.07

0.135

$27,296.30

7

148,811.12

0.135

61,328.78

8

72,256.38

0.135

$26,236.71

8

163,692.24

0.135

59,437.59

9

78,882.02

0.135

$25,235.69

9

180,061.46

0.135

57,604.71

10

86,170.22

0.135

$24,288.38

10

198,067.61

0.135

55,828.36

NPV

$143,148.01

NPV

$345,394.53

Payback Period

3.38

Payback Period

3.2

IRR

31.34%

IRR

31.32%

1. take each annual cash flow and assign three possible dollar amounts given three scenarios: pessimistic, most likely, and optimistic. Let the dollar value you originally chose to be the most likely amount, the pessimistic value be less than this amount, and the optimistic value be greater than this amount.
2. Calculate therangesof the NPVs between the pessimistic and optimistic outcomes and determine which of the two projects is riskier.
3. Develop a simplified RADR by adjusting the discount rate originally chosen for the different levels of risk calculated in partc and calculate therisk adjusted NPVfor each project.
4. choose which project your firm will implement and explain why. Be mindful that the reasons for the decision are as important as the choice of investment made by your group. View your final decision as an opportunity to defend your choice to a broader audience, perhaps the firm's board of directors.