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Problem 4 Consider the following mutually exclusive revenue producing projects, with i* 15 %. 2020 Project A Year Gross revenue Operating costs Capital costs 2021

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Problem 4 Consider the following mutually exclusive revenue producing projects, with i* 15 %. 2020 Project A Year Gross revenue Operating costs Capital costs 2021 5,000 (3,500) 2022 11,000 (4,500) 2023 11,000 (4,500) (10,000) 2024 11,000 (4,500) 2025 11,000 (4,500) 2026 11,000 (4,500) 2027 11,000 (4,500) 2028 11,000 (4,500) (10,000) 2020 2022 2023 Project B Year Gross revenue Operating costs Capital costs 2021 5,000 (1,000) 5,000 (1,000) 5,000 (1,000) 2024 5,000 (1,000) 2025 5,000 (1,000) (6,000) For each alternative, calculate: a) Rate of Return b) NPV c) Present value ratio Benefit-cost ratio Growth rate of return Note: Use a common evaluation period for both alternatives

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