Shop NBC is evaluating two major project initiatives. Evaluate the two projects below and calculate the payback period, the NPV, and the IRR of both projects.
State which project or projects should be accepted or rejected. Show your work.
|
|
Year
|
Apparel DC
|
High Def. Studio
|
|
Initial Investment
|
0
|
($175,000)
|
($36,000)
|
|
Cash Flows
|
1
|
$87,000
|
$19,000
|
|
2
|
$78,000
|
$16,000
|
|
3
|
$84,000
|
$3,500
|
Calculate the payback for each project. If the firm's required payback is 2 years, which project or projects should be accepted and which should be rejected? Why?
Calculate the NPV for each project using a required rate of return of 11.5 percentage. Which project or projects should be accepted and which should be rejected? Why? Calculate the IRR for each project.