Question
DEF Industries is analyzing three potential projects. Project A requires an initial investment of $300,000 and offers cash inflows of $80,000 in year one, $100,000
DEF Industries is analyzing three potential projects. Project A requires an initial investment of $300,000 and offers cash inflows of $80,000 in year one, $100,000 in year two, $120,000 in year three, and $90,000 in year four. Project B requires an initial investment of $350,000 with cash inflows of $90,000 in year one, $110,000 in year two, $130,000 in year three, and $100,000 in year four. Project C requires an initial investment of $400,000 with cash inflows of $100,000 in year one, $120,000 in year two, $140,000 in year three, and $110,000 in year four.
Requirements:
- Calculate the NPV for each project using a 10% discount rate.
- Determine the PI for each project.
- Compute the Internal Rate of Return (IRR) for each project.
- Prepare a cash flow statement for the chosen project over the four years.
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