Problem:

Marchase Industries is in the process of choosing the better of two equal-risk, mutually exclusive capital expenditure projects - M an N, with an initial investment of $32,500 and $28,500 respectively. The relevant cash flows for each project are shown in the following table. The firm's cost of capital is 11%.

Year (t)

0

1

2

3

4

Project M

S

S

Cash Inflows (CFt)

(32,500) $

12,000

12,000

S

12,000

S

12,000

Project N

(28,500)

14,000

12,000

8,000

5,000

Calculate:

1.Project M Payback Period (years)

2.Project N Payback Period (years)

3.Project M Discounted Payback Period(years)

4.Project N Discounted Payback Period(years)

5.Project M & N Net Present Value

6.Project M&N IRR

Problem: Marchase industries is in the process of choosing the better of two equal-risk, mutually exclusive capital expenditure projects- M an N, with an initial investment of $32,500 and $28,500 respectively. The relevant cash flows for each project are shown in the following table. The firm's cost of capital is 11%