Projects a and b of equal risk are alternatives for expanding Rosas companys copacity. The firms cost of capital is 13%. The cash flows fro each project are shown in the following table.
Project A Project B
Initiatal investment (CFo) $80,000 $50,000
YEAR (T) cash inflows (CF1)
1 $15,000 $15,000
2 20,000 15,000
3 25,000 15,000
4 30,000 15,000
5 35,000 15,000
a) Calculate the payback period for each project and post only your answer. (Calculations need not be shown.)
b) If projects are mutually exclusive and the corporation is using a maximum recovery period of 4 years, which project(s) should be selected? Explain your selection.
c) Calculate the NPV for each project and post only your answer. (Calculations need not be shown.)
d) If projects are mutually exclusive which project(s) should be selected? Explain your selection.
e) Calculate the IRR for each project and post only your answer. (Calculations need not be shown.)
f) If projects are mutually exclusive which project(s) should be selected? Explain your selection.
g) Overall, which project(s) should the corporation select? Explain why you chose the project(s) you did.