a Calculate each projects payback penod b. Calculate the net present value (NPV)

Question

a Calculate each projects payback penod b. Calculate the net present value (NPV) for each project C. Calolate the internal rate of eur for each pro d. Indicate which project you would recommend Data Table (Click on the lcon located on the sop-right corner of the data table below in order to copy ts coments rto a spread heet) a. The payback period ofpred A is?years (Round to two dermal places ) The payback period of project B ls years (Round to tovo decimal places) b. The NPV of project A is s(Round to the nearest cent The 1PV of projet B isRound to the nearest cent e. The IRR of proect A s»% Round to two oecmal paces ) nitial investment GF 65.000 $70,000 $75.000 60,000 d. Which project will you recommend? Select the best anwer belo) Pint Dons B Project E

Explanation / Answer

Answer a Answer b Calculation of payback period Calculation of NPV Year Project A Project B Year Discount factor @ 11% Project A Project B Cash flow Cumulative Cash flow Cash flow Cumulative Cash flow Cash flow Present Values Cash flow Present Values 0 -230000 -230000 -200000 -200000 0 1 -230000 - 230,000.00 -200000 - 200,000.00 1 60000 -170000 60000 -140000 1 0.900901 60000       54,054.05 60000      54,054.05 2 65000 -105000 60000 -80000 2 0.811622 65000       52,755.46 60000      48,697.35 3 70000 -35000 60000 -20000 3 0.731191 70000       51,183.40 60000      43,871.48 4 75000 40000 60000 40000 4 0.658731 75000       49,404.82 60000      39,523.86 5 80000 120000 60000 100000 5 0.593451 80000       47,476.11 60000      35,607.08 NPV       24,873.84      21,753.82 Payback period of Project A = 3 years + [$35000/$75000] = 3.47 years Payback period of Project B = 3 years + [$20000/$60000] = 3.33 years NPV of project A $24,873.84 NPV of project B $21,753.82 Answer c Calculation of IRR of the project Answer d I would recommend Project A as it has higher NPV. IRR of project A 15.00% IRR of project B 15.24%

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