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Your company is considering a new capital investment with different initial costs as noted in the table below. You want to consider whether this investment
Your company is considering a new capital investment with different initial costs as noted in the table below. You want to consider whether this investment is appropriate for your firm, and want to consider your options based on a net present value analysis.
Given the following information:
| Project A | Project B | |
|---|---|---|
| Overall Cost: | $250,000 | $275,000 |
| Inflow: | ||
| Year 1 | $150,000 | $50,000 |
| Year 2 | $65,000 | $50,000 |
| Year 3 | $60,000 | $50,000 |
| Year 4 | $50,000 | |
| Year 5 | $50,000 |
You are in charge of the creation of the capital budget for this new acquisition and have been asked to calculate the following:
The project Payback
The project's Net Present Value (at a discount rate of 12%)
The overall cash flow of the project
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