Project 1 (Gasoline E5 factory)

Machinery and equipment

Initial cost: $7,500,000.00

Use life: 25 years

Capacity: 15,000,000 (liters)

Residual value: $1,000,000

Bill of materials (per liter)

Direst materials: $0.50

Direct labor: $0.20

Utilities: $0.10

Selling price (per liter): $0.90

B2B Marketing Expense: 0.4% of segment revenue

Project 2 (Soilvent Ograsol)

Machinery and equipment

Initial cost: $4,500,000.00

Use life: 25 years

Capacity: 20,000,000 (liters)

Residual value: $200,000

Bill of materials (per liter)

Direst materials: $0.25

Direct labor: $0.15

Utilities: $0.05

Selling price (per liter): $0.50

B2B Marketing Expense: 0.9% of segment revenue

Question:

Calculate the payback period, Internal Rate of Return (IRR), and Net Present Value (NPV) for the 2 project

Select the investment that will create the most value. Explain and evaluate any "possible risks" that investors "might" face when investing in the project