What is the benefit-cost ratio for the project


Assignment

1. Payback Analysis

Two new wind-farm tower projects are proposed for a small company that installs them in south western Pennsylvania. Project A will cost $250,000 to complete and is expected to have an annual net cash flow of $75,000. Project B will cost $150,000 to complete and should generate annual net cash flows of $52,000. As a small company, the owner and senior management team are very concerned about their cash flow.

Use the payback period method and determine which project is better from a cash flow standpoint.

Show your work and include any formulas used to calculate PP.

2. Net Present Value

A recent project nominated for consideration at your company has a four-year cash flow of $20,000; $25,000; $30,000; and $50,000. The cost of the project is $75,000.

a. If the required rate of return is 20%, conduct a discounted cash flow calculation to determine the NPV.

b. What is the benefit-cost ratio for the project?

c. What would the NPV of the above project be if the inflation rate was expected to be 4% in each of the next four years?

The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.

Solution Preview :

Prepared by a verified Expert
Project Management: What is the benefit-cost ratio for the project
Reference No:- TGS03010016

Now Priced at $35 (50% Discount)

Recommended (94%)

Rated (4.6/5)