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Suppose you are the financial manager of a firm considering the following five projects. Project A Project B Project C Project D Project E Initial
Suppose you are the financial manager of a firm considering the following five projects.
| Project A | Project B | Project C | Project D | Project E | |
|---|---|---|---|---|---|
| Initial Investment | -$10,000 | -$15,000 | -$14,000 | -$6,000 | -$1,500 |
| Year 1 | $5,000 | $5,000 | $6,000 | $4,000 | $1,000 |
| Year 2 | $4,000 | $5,000 | $4,000 | $2,000 | $250 |
| Year 3 | $2,000 | $5,000 | $3,500 | $2,000 | $100 |
| Year 4 | $1,000 | $5,000 | $2,500 | $2,000 | $100 |
| Year 5 | $5,000 | $2,000 | $100 | ||
| Year 6 | $2,000 | $100 |
- Calculate the Payback Period for each project.
- Calculate the NPV for each project, assuming a discount rate of 11%.
- Calculate the IRR for each project.
- Which projects should the firm implement based on your analysis If the projects are mutually exclusive? What if they are independent? Write an email to your CFO explaining your rationale for proving the choices based on the considerations of shareholder value. Assume there is no capital constraint and any desired projects can be funded.
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The Making Of Finance
Authors: Isabelle Chambost, Marc Lenglet, Yamina Tadjeddine
1st Edition
1138498572, 978-1138498570
