Question 4

Scenario: Given the following annual cash flows for Project C and Project D:

• Project C:
  • Year 0: -$90,000
  • Year 1: $25,000
  • Year 2: $20,000
  • Year 3: $30,000
  • Year 4: $35,000
  • Year 5: $40,000
  • Year 6: $45,000
• Project D:
  • Year 0: -$110,000
  • Year 1: $30,000
  • Year 2: $35,000
  • Year 3: $40,000
  • Year 4: $45,000
  • Year 5: $50,000
  • Year 6: $55,000

Requirements: a. Determine the NPV for each project with a required rate of return of 9 percent. b. Calculate the IRR for each project. c. Assess the traditional payback period for each project. d. Select which project(s) should be undertaken if they are independent. e. Choose which project should be undertaken if they are mutually exclusive.