Question 9

Scenario: Evaluate the following annual cash flows for Projects P and Q:

• Project P:
  • Year 0: -$110,000
  • Year 1: $35,000
  • Year 2: $40,000
  • Year 3: $45,000
  • Year 4: $50,000
  • Year 5: $55,000
  • Year 6: $60,000
• Project Q:
  • Year 0: -$150,000
  • Year 1: $40,000
  • Year 2: $45,000
  • Year 3: $50,000
  • Year 4: $55,000
  • Year 5: $60,000
  • Year 6: $70,000

Requirements: a. Calculate the NPV for each project using a discount rate of 8 percent. b. Find the IRR for each project. c. Determine the traditional payback period for each project. d. Advise which project(s) should be selected if they are independent. e. Advise which project should be selected if they are mutually exclusive.