Question
Please solve using excel where applicable. Please show all formulas as well. Thank you All techniques with NPV profileMutually exclusive projectsProjects A and B, of
Please solve using excel where applicable. Please show all formulas as well. Thank you
All techniques with NPV profileMutually exclusive projectsProjects A and B, of equal risk, are alternatives for expanding Rosa Company's capacity. The firm's cost of capital is 13%. The cash flows for each project are shown in the followingtable:
Project A
Initial investment (CF0) -80,000
Cash inflows
Year 1 $15,000
Year 2 $20,000
Year 3 $25,000
Year 4 $30,000
Year 5 $35,000
Project B
Initial Investment -50,000
Cash Inflows
Year 1 $15,000
Year 2 $15,000
Year 3 $15,000
Year 4 $15,000
Year 5 $15,000
a. Calculate each project's payback period.
b. Calculate the net present value(NPV) for each project.
c. Calculate the internal rate of return(IRR) for each project.
d. Draw the net present value profiles for both projects on the same set of axes, and discuss any conflict in ranking that may exist between NPV and IRR.
e. Summarize the preferences dictated by each measure, and indicate which project
you would recommend. Explain Why
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