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Period 0 1 2 3 4 5 6 7 8 9 10 11 PBP NPV IRR Project A $ (1,000,000) $ 200,000 $ 200,000 $
Period | 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | PBP | NPV | IRR |
Project A | $ (1,000,000) | $ 200,000 | $ 200,000 | $ 200,000 | $ 200,000 | $ 200,000 | $ 200,000 | $ 200,000 | $ 200,000 | $ 200,000 | $ 200,000 | $ 400,000 | |||
Project B | $ (1,000,000) | $ 500,000 | $ 500,000 | $ 500,000 | |||||||||||
Project C | $ (80,000) | $ 1,040 | $ 9,456 | $ 11,405 | $ 18,567 | $ 47,453 | $ 6,394 | $ 45,727 | $ 51,933 | $ 85,625 | |||||
Project D | $ (400,000) | $ 4,161 | $ 37,824 | $ 45,618 | $ 74,269 | $ 189,812 | $ 25,577 | $ 182,907 | $ 207,733 | $ 342,499 | |||||
Project E | $ (17,000) | $ 16,000 | $ 16,000 | $ (16,000) | $ 16,000 | $ (52,000) | |||||||||
Project F | $ (5,000) | $ 2,000 | $ 2,000 | $ 2,000 | $ 2,000 | $ 2,000 | |||||||||
Project G | $ (5,000) | $ - | $ - | $ - | $ - | $ 15,000 | |||||||||
Project H | $ (20,000) | $ 7,000 | $ 7,000 | $ 7,000 | $ 7,000 | $ 7,000 |
Answer the question below contains a list of available investment projects and their respective cash flows. Using a cost of capital of 10%,
- Find the payback period, net present value and internal rate of return for each project.
- Based on the results, identify conflicts in ranking the above projects based on the IRR and NPV approaches, i.e. a project that has a higher rank using IRR but a lower rank using NPV and vice versa. You should also provide a discussion of what caused the conflict
- Provide a discussion of the advantages and disadvantages of all the capital budgeting techniques covered in this course, and identify methods to overcome the disadvantages (if available)
- Provide a brief discussion (a small paragraph) of the practicality (uses in real life) of the different capital budgeting methods.
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