Question
You have been recently been hired by ABC Landscaping, and for your first assignment, you are to determine which project the company should accept out
You have been recently been hired by ABC Landscaping, and for your first assignment, you are to determine which project the company should accept out of two possibilities. You have been provided the following cash flows.
Year | Adams Job | Brooks Job |
---|---|---|
0 | -$375 | -575 |
1 | -300 | 190 |
2 | -200 | 190 |
3 | -100 | 190 |
4 | 600 | 190 |
5 | 600 | 190 |
6 | 926 | 190 |
7 | -200 | 0 |
a. If both of the jobs cost of capital is 12%, which project should you recommend? If the cost of capital is 18%, would that change your plans? Explain
b. Provide a NPV profile for both jobs.
c. Determine the IRR for both jobs.
d. What is the crossover rate, and why is that important? Explain.
e. Determine the MIRR at the cost of capital 12%? At 18% (Hint: Consider Period 7 as the end of the Brooks job life).
f. What is the payback period for both jobs?
g. What is the profitability index for each of the jobs if the cost of capital is 12%
h. Which job do you recommend? Why?
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