The Sanders Electric Company is evaluating 2 projects for possible inclusion in the firm's capital budget. Project M will require a $37,000 investment while project O"s investment will be $46,000. After-tax cash inflows are estimated follows for the 2 projects:
year project M project O
1 $12,000 $10,000
2 $12,000 $10,000
3 $12,000 $15,000
4 $12,000 $15,000
5 $15,000
a. Determine the payback period for each project.
b. Calculate the NPV & profitability index for each project based on a 10% cost of capital. Which, if either, of the projects is acceptable?
c. Determine the IRR & MIRR for projects M & O.