Required: Follow the steps below:

1. Review the background information in this assignment outline and the corresponding financial information for your group provided in Microsoft Excel.
2. In Microsoft Excel, calculate the Internal Rate of Return (IRR), Net Present Value (NPV), and Payback Period for each investment option.
3. Three evaluation calculations for each mutually exclusive Investment Options A, B, and C. For each Investment option, note whether the three evaluation calculations are good (best score), neutral (in between), or bad (worst score).
4. Given the results of your calculations and analysis, recommend whether the company should invest in Options A, B, or C. Financial Analysis

Background

You work for a company that is considering three investment proposals. Your leader has asked you to calculate IRR, NPV, and Payback period, and recommend whether the company should invest in either Investment A, Investment B, or Investment C.

Step #1 - Using the cash flow information provided for each investment option, calculate the following.

Investment A

• Internal Rate of Return (IRR)
• Net Present Value (NPV)
• Payback Period

Investment B

• Internal Rate of Return (IRR)
• Net Present Value (NPV)
• Payback Period

Investment C

• Internal Rate of Return (IRR)
• Net Present Value (NPV)
• Payback Period

Step #2 - Compare the IRR, NPV, and Payback period for each investment alternative. Determine which investment is good, bad or neutral for each type of calculation. Take all of that into account in your recommendation.

Step #3 -

1. Clearly note the intention of the slide deck and investment analysis.
2. Using your analysis in Step #2, explain what the IRR, NPV, and Payback tell us in general, and then what these specific calculations tell us about each investment.
3. Provide a recommendation on what Investment option the company should undertake and why.

Please note, there is no capital budget to take into consideration.

Your Data: Investment B \begin{tabular}{|c|c|c|c|c|c|c|} \hline & Initial Expenditure & Year\#1 & Year \#2 & Year\#3 & Year \#4 & Year \#5 \\ \hline Net Imvestment Cost & ($510,000) & & & & & \\ \hline Additional Revenue & & $382,500 & $325,125 & $89,250 & $76,500 & $51,000 \\ \hline Additional Operating Expenses & & ($19,125) & ($19,125) & ($25,500) & ($31,875) & ($38,250) \\ \hline Amortization & & ($76,500) & ($112,200) & ($107,100) & ($107,100) & ($107,100) \\ \hline Net Increase in Income & ($510,000) & $286,875 & $193,800 & ($43,350) & ($62,475) & ($94,350) \\ \hline Less: Tax@33\% & & ($94,669) & ($63,954) & $0 & $0 & $0 \\ \hline Increase in Aftertax Income & & $192,206 & $129,846 & ($43,350) & ($62,475) & ($94,350) \\ \hline Add back Amortization & & $76,500 & $112,200 & $107,100 & $107,100 & $107,100 \\ \hline Net Change in Cash Flow & ($510,000) & $268,706 & $242,046 & $63,750 & $44,625 & $12,750 \\ \hline WACC & 8.00% & & & & & \\ \hline \multicolumn{7}{|l|}{ Investment C } \\ \hline & Initial Expenditure & Year\#1 & Year \#2 & Year\#3 & Year \#4 & Year \#5 \\ \hline Net Imvestment Cost & ($700,000) & & & & & \\ \hline Additional Revenue & & $87,500 & $175,000 & $262,250 & $393,750 & $525,000 \\ \hline Additional Operating Expenses & & ($26,250) & ($26,250) & ($26,250) & ($26,250) & ($26,250) \\ \hline Amortization & & ($17,500) & ($17,500) & ($17,500) & ($17,500) & ($17,500) \\ \hline Net Increase in Income & ($700,000) & $43,750 & $131,250 & $218,500 & $350,000 & $481,250 \\ \hline Less: Tax@33\% & & ($14,438) & ($43,313) & ($72,105) & ($115,500) & ($158,813) \\ \hline Increase in Aftertax Income & & $29,313 & $87,938 & $146,395 & $234,500 & $322,438 \\ \hline Add back Amortization & & $17,500 & $17,500 & $17,500 & $17,500 & $17,500 \\ \hline Net Change in Cash Flow & ($700,000) & $46,813 & $105,438 & $163,895 & $252,000 & $339,938 \\ \hline WACC & 8.00% & & & & & \\ \hline \end{tabular}