Another separate project has come up. Your boss feels you are overworked and has another analyst do the analysis but wants your opinion on which projects should be undertaken. The other analyst’s projects have the following criteria:
Please answer the following questions:
1. If all investments are mutually exclusive and there is no capital rationing, which project should the company undertake and why?
2. If the projects are independent and there is no capital constraint, which project(s) should the company undertake and why?
Project #1
Net Initial Investment: 1,495,000
Payback: 3.1
NPV: 120,000
PI: 1.01
IRR: 13.02%
Project #2
Net Initial Investment: 680,000
Payback: 4.1
NPV: 64,000
PI: 1.30
IRR: 15.02%
Project #3
Net Initial Investment: 500,000
Payback: 6.1
NPV: -25,000
PI: 0.89
IRR: 11.02%
Project #4
Net Initial Investment: 450,000
Payback: 3.1
NPV: 100
PI: 1.001
IRR: 13.01%