Question
Your company is trying to decide between the following three projects. In your calculations, assume a 6% interest rate. Project A Project B Project C
Your company is trying to decide between the following three projects. In your calculations, assume a 6% interest rate. Project A Project B Project C Project A has $400 in upfront costs in year 0 and gets 250 in benefits in year 0. It accrues $300 in benefits each year in years 1-3, and has annual costs of $200 in years 1-3. Project B costs $1300 in year 0 and has no benefits in year 0. It accrues $650 in benefits each year in years 1-3. Annual costs in years 1-3 are $450. Project C has $1000 in upfront benefits and 1600 in costs in year 0. It accrues 600 in benefits in years 1-3 and 350 in costs in years 1-3. Time value of money. Using the discounting techniques we learned in class (assume an interest rate of 6%), appropriately discount the costs and benefits of the three projects. Which project will have a higher return on investment? Be sure to show your work (10 pts). Which project achieves payback faster? (5 pts)?
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