NPV,

with rankingsBotany Bay, Inc., a maker of casual clothing, is considering four projects shown in the following table :

Project A

Project B

Project C

Project D

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Initial investment

(CF 0CF0)

$50,000

$99,300

$79,200

$180,200

Year

(t)

Cash inflows

(CF Subscript tCFt)

1

$20,100

$36,500

$20,100

$99,100

2

$20,100

$51,200

$39,100

$81,000

3

$20,100

$50,500

$59,400

$60,300

Because of past financial difficulties, the company has a high cost of capital at

14.2 %.

a.Calculate the NPV of each project, using a cost of capital of 14.2 %.

b.Rank acceptable projects by NPV.

c.Calculate the IRR of each project and use it to determine the highest cost of capital at which all of the projects would be acceptable.