You work for a company, which expects to earn at least $8$ percent on its projects. The cash flow

information for $4$ potential projects is described below.

Find the NPV of each project.

Which of the projects would you fund if the decision is based only on financial information?

What other information would you need to make such a decision? Why?

Would an organization ever take on a project with negative NPV$?$ If so why?

A$.$ Project ALPHA: This project requires no initial investment at the project initiation, but will cost an

estimated $$280,000$ in each of the following $5$ years. Project revenues will begin in year $4,$

estimated at $$150,000$ in year $4,$$$350,000$ in year $5$ and $$450,000$ in years $6$ through $8.$

B$.$ Project BETA: Project Beta requires investment of $$800,000$ at initiation, and then an estimated

$$350,000,$$$250,000,$$$150,000$ and $$150,000$ in the following $4$ years, respectively. Annual

revenues will begin to flow in starting in year $5$ at $$225,000$ and increasing by $$25,000$ each year up

to and including year $14.$

C$.$ Project CAPPA: This project will require an initial investment of $$565,000$ at the project initiation,

plus an estimated $$450,000,$$$325,000$ and $$325,000$ in each of the following years, respectively.

The payout for this project will be lump sums of $$1,070,000$ in each of years $4$ and $5.$

D$.$ Project DELTA: Project Delta is a $15$ year project that requires an initial investment of $$425,000.$

Annual costs in each of the following years of $$75,000$ will be offset by biannual revenues $($every two

years starting in year $3)$ of $$289,000$ in each of those years.