Problem 1: The director of capital budgeting for Giant Company Inc. has identified two mutually exclusive projects, L and S, with the following expected net cash flows:
Expected Net Cash Flows
Year Project L Project S
0 ($200) ($200)
1 20 140
2 120 100
3 160 40
Both projects have a cost of capital of 10 percent. Which project should be selected?
a. Project L
b. Project S
Problem 2: What is the payback period for Project S in question above?
Problem 3: What is Project L's NPV in question above?
Problem 4: What is Project L's IRR?