LG2 LG 3 P10-21 All techniques, conflicting rankings Nicholson Roofing Materials, Inc., is consider- ing two mutually exclusive projects, each with an initial investment of $150,000. LG 4 The company's board of directors has set a maximum 4-year payback requirement and has set its cost of capital at 9%. The cash inflows associated with the two proj- ects are shown in the following table. Year 1 2 Cash inflows (CF) Project A Project B $45,000 $75,000 45,000 60,000 45,000 30,000 45,000 30,000 45,000 30,000 45,000 30,000 3 4 5 a. Calculate the payback period for each project. b. Calculate the NPV of each project at 0%. c. Calculate the NPV of each project at 9%. d. Derive the IRR of each project. e. Rank the projects by each of the techniques used. Make and justify a recommen- dation. f. Go back one more time and calculate the NPV of each project using a cost of capital of 12%. Does the ranking of the two projects change compared to your answer in part e? Why? LG 2 LG 3 P10-22 Payback, NPV, and IRR Rieger International is attempting to evaluate the feasibility of investing $95,000 in a piece of equipment that has a 5-year life. The firm has esti- mated the cash inflows associated with the proposal as shown in the following table. The firm has a 12% cost of capital. LG 4 Year (t) Cash inflows (CF) 1 $20,000 2 25,000 3 30,000 4 35,000 5 40,000 a. Calculate the payback period for the proposed investment. b. Calculate the net present value (NPV) for the proposed investment. c. Calculate the internal rate of return (IRR), rounded to the nearest whole percent, for the proposed investment. d. Evaluate the acceptability of the proposed investment using NPV and IRR. What recommendation would you make relative to implementation of the project? Why