MGT 325 MOD 5, AQ 18 All techniques with NPV profileMutually exclusive projects Project A and B, of equal risk, are alternatives for expanding Rosa Companys capacity. The firms cost of capital is 12%. The cash flows for each project are shown in the following table: 1 a. Calculate each projects payback period.

b. Calculate the net present value (NPV) for each project.

c. Calculate the internal rate of return (IRR) for each project.

d. Indicate which project you would recommend. a. The payback period of project A ______ years? ( Round to two decimal places.)

The payback period of project A ______ years? ( Round to two decimal places.)

b. The NPV of project A is_______. ( Round to the nearest cent.)

The NPV of project B is_______. ( Round to the nearest cent.)

c. The IRR of project A is _______% ( Round to two decimal places.)

The IRR of project B is _______% ( Round to two decimal places.)

d. Which project will you recommend, project A or project B Project A Project B Initial investment $130,000 100,000

(CF=0)

Year (t) Cash inflows (CF{t})

1 $30,000 $30,000

2 $35,000 $30,000

3 $40,000 $30,000

4 $45,000 $30,000

5 $50,000 $30,000