XYZ Corporation is considering the manufacture of a thermosetting resin as packaging material. R&D Teams have developed two alternatives: Synthetic Resin, and Epoxy Resin. The following tables show the expected CFFA from each project. Synthetic Resin Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Net Cash Flow (1,100,000) 150,000 200,000 300,000 650,000 700,000 Epoxy Resin Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Net Cash Flow (850,000) 650,000 400,000 300,000 250,000 200,000
a. What is the best project according to the payback method?
b. What is the best project according to the IRR method?
c. What is the best project according to the NPV method? Use a discount rate of 15%
d. Compare each of the three project decision-making methods used above. Discuss the advantages and disadvantages of each one.