Homework
Complete the following questions using Microsoft Excel. No other submission format is allowed. Review the grading rubric to confirm you are meeting the homework requirements.
Paderborn Industries is considering two investment projects. The estimated cash flow in SARs for each project is as follows:
Year Plant Expansion Retail Store Expansion
(7,500,000) (7,500,000)
1 2,200,000 3,050,000
2 2,200,000 2,700,000
3 2,200,000 2,050,000
4 2,200,000 1,650,000
5 2,200,000 920,000
Total 11,000,000 10,370,000
The company has decided that the appropriate discount rate is 10%.
Required:
a. Calculate the payback for each project (to 3 decimal points).
b. Calculate the Net Present Value (NPV) for each project.
c. Calculate the Present Value Index (PI) for each project (round to 3 decimal places).
d. Calculate the Internal Rate of Return (IRR) for each project (Round to 2 decimal places).
e. Advise management on which, if either, project to pursue and why.
Format your homework according to the give formatting requirements:
a. The answer must be double spaced, typed, using Times New Roman font (size 12), with one-inch margins on all sides.
b. The response also includes a cover page containing the title of the homework, the course title, the student's name, and the date. The cover page is not included in the required page length.
c. Also include a reference page. The references and Citations should follow APA format. The reference page is not included in the required page length.