Question: Two mutually exclusive projects, each require an up front expenditure of $30 million. The cost of capital is 10%. The investments will produce the following net cash flows.
Year Project A Project B
0 -30,000,000 -30,000,000
1 10,000,000 15,000,000
2 15,000,000 15,000,000
3 15,000,000 20,000,000
4 5,000,000 -5,000,000
a. What is the NPV for Project A?
b. What is the NPV for Project B?
c. What is the payback for Project A?
d. What is the payback for Project B?