Question 10

A firm is evaluating a project that requires an initial investment of $300,000. The project's cash flows over 5 years and the firm's cost of capital (8%) are given below. Compute the NPV, IRR, and payback period. Provide a recommendation based on the results.

Cash Flows:

Year	Cash Flow ($)
1	50,000
2	60,000
3	70,000
4	80,000
5	90,000

Requirements:

1. Calculate the NPV.
2. Determine the IRR.
3. Calculate the payback period.
4. Provide a recommendation based on the financial analysis.

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Question 1

Given the following cash flows for Project A and Project B:

Year	Project A	Project B
0	-50000	-120000
1	12000	20000
2	15000	25000
3	18000	30000
4	22000	35000
5	25000	40000
6	30000	50000

Requirements: a. Calculate the NPV for both projects assuming a required rate of return of 10%. b. Determine the IRR for each project. c. Calculate the traditional payback period for both projects. d. If the projects are independent, which project(s) should be selected? Explain. e. If the projects are mutually exclusive, which project should be selected? Explain.