Forum 5 Analysis: Both Projects are acceptable because NPV of both are positive which is good from an investment point of view. As for the payback period, project B can be selected becasue it's slightly lower compared to project A. IRR of both projects is in the same range, so by the IRR rule both can be chosen. But project a is higher so it will have preference over project B. IRR rules also states that the IRR should be above the cost of capital if a project needs to be selected. The mjor difference in these two projects is the initial investment and the revenue generation. Project A is my pick.

Posl. NY Initial Investments Cash Flows for project A $ 150,000.00 Discount Rate Project A 13.50% Present value Year 0 -150000 1.00 1 0.135 2 0.1351 3 0.135 4 0.135 5 0.135 40,000.00 43,400.00 47,140.00 51,254.00 55,779.40 60,757.34 66,233.07 72,256.38 78,882.02 86,170.22 Cash Flows for project B Initial Investment $ 300,000.00 Discount Rate Present Value Year Project B 13.50% 0 -300000 1.000 -300000 1 84,000.00 0.135 74,008.81 2 92,400.00 0.135 71,726.60 3 101,640.00 0.135 69,514.77 4 111,804.00 0.135 67,371.14 5 122,984.40 0.135 65,293.62 6 135,282.84 0.135 63,280.16 7 148,811.12 0.135 61,328.78 8 163,692.24 0.135 59,437.59 9 180,061.46 0.135 57,604.71 10 198,067.61 0.135 55,828.36 NPV $345,394.53 Payback Period 3.2 IRR 31.32% 6 -150000 $35,242.29 $33,689.77 $32,240.52 $30,884.77 $29,613.83 $28,419.97 $27,296.30 $26,236.71 $25,235.69 $24,288.38 $143,148.01 3.38) 0.135 7 0.1351 8 0.1351 9 0.135 10 0.135 INPV Payback Period IRR 31.34% 2. Using the variable(s) selected in part a, 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 be the most likely amount, the pessimistic value be less than this amount, and the optimistic value be greater than this amount. 3. Calculate the ranges of the NPVs between the pessimistic and optimistic outcomes, and determine which of the two projects is riskier. 4. Develop a simplified RADR by adjusting the discount rate originally chosen for the different levels of risk calculated in part c, and calculate the risk-adjusted NPV for each project. 5. Using all of the analysis from Module 5 forum and Module 6 forum, and concentrating on the new risk-based information, 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. Posl. NY Initial Investments Cash Flows for project A $ 150,000.00 Discount Rate Project A 13.50% Present value Year 0 -150000 1.00 1 0.135 2 0.1351 3 0.135 4 0.135 5 0.135 40,000.00 43,400.00 47,140.00 51,254.00 55,779.40 60,757.34 66,233.07 72,256.38 78,882.02 86,170.22 Cash Flows for project B Initial Investment $ 300,000.00 Discount Rate Present Value Year Project B 13.50% 0 -300000 1.000 -300000 1 84,000.00 0.135 74,008.81 2 92,400.00 0.135 71,726.60 3 101,640.00 0.135 69,514.77 4 111,804.00 0.135 67,371.14 5 122,984.40 0.135 65,293.62 6 135,282.84 0.135 63,280.16 7 148,811.12 0.135 61,328.78 8 163,692.24 0.135 59,437.59 9 180,061.46 0.135 57,604.71 10 198,067.61 0.135 55,828.36 NPV $345,394.53 Payback Period 3.2 IRR 31.32% 6 -150000 $35,242.29 $33,689.77 $32,240.52 $30,884.77 $29,613.83 $28,419.97 $27,296.30 $26,236.71 $25,235.69 $24,288.38 $143,148.01 3.38) 0.135 7 0.1351 8 0.1351 9 0.135 10 0.135 INPV Payback Period IRR 31.34% 2. Using the variable(s) selected in part a, 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 be the most likely amount, the pessimistic value be less than this amount, and the optimistic value be greater than this amount. 3. Calculate the ranges of the NPVs between the pessimistic and optimistic outcomes, and determine which of the two projects is riskier. 4. Develop a simplified RADR by adjusting the discount rate originally chosen for the different levels of risk calculated in part c, and calculate the risk-adjusted NPV for each project. 5. Using all of the analysis from Module 5 forum and Module 6 forum, and concentrating on the new risk-based information, 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