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Your company is evaluating two projects with the below cash flow expectations. Answer the following questions: a) Calculate the NPV for each project under various
Your company is evaluating two projects with the below cash flow expectations. Answer the following questions: a) Calculate the NPV for each project under various cost of capital assumptions (5%, 10% and 15%). b) Calculate the IRR for these two projects. c) Assuming a cost of capital of 11% which of these projects would be creating value for investors? d) Calculate the Payback Period for these two projects. e) If we could only choose one project which would you recommend? Why? | ||||||||||||
Year | Project A | Project B | ||||||||||
0 | $(150,000) | $(250,000) | ||||||||||
1 | $25,000 | $- | ||||||||||
2 | $75,000 | $- | ||||||||||
3 | $50,000 | $- | ||||||||||
4 | $25,000 | $- | ||||||||||
5 | $20,000 | $- | ||||||||||
6 | $10,000 | $350,000 |
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