cost of capital 11.4%

Q7: Project A and B, of equal risk, are alternatives for expanding Rosa Company's capacity. The cost of capital is (see Appendix). The cash flows for each project are shown in the following table. 8 Project A Project B Initial investment (CF) $40,000 $40,000 Year (t) Cash inflows (CF) $13,000 $ 7.000 1 2 13,000 10,000 3 13,000 13,000 13,000 4 16,000 19,000 5. 13,000 a) Calculate each project's payback period and comment on projects acceptance if maximum acceptable payback period is 3 years. 2 2 3 b) Calculate the net present value (NPV) for each project and provide comment. 3 c) Calculate the internal rate of return (IRR) for each project and provide comment. 3