You are the head of the project selection team at SIMSOX. Your team is consideri

Question

You are the head of the project selection team at SIMSOX. Your team is considering three different projects. Based on past history SIMSOX expects at least a rate of return of 20 percent. Given the following information for each project, which one should be SIMSOX first priority? Should SIMSOX fund any of the other projects? (Use the NPV function in Excel to solve this problem.) Project: Dust Devils Year Investment Revenue Stream 500,000 50,000 250,000 350,000 Project: Ospry Year Investment Revenue Stream 250,000 75,000 75,000 75,000 50,000 Project: Voyagers Year Investment Revenue Stream 75,000 15,000 25,000 50,000 50,000 150,000 The NPV for Dust Devils is The NPV for Ospry is The NPV for Voyagers is How many projects should be funded? $ (106,020)

Explanation / Answer

NPV for Dust devils is 124118.32

NPV for Ospry is 14504.3

NPV for Voyagers is 196424.76

As it can be seen that the project Voyagers should be the first priority of the company, it may also fund project Ospry and Dust devils as they also have the positive NPV. Therefore all three project can be funded.

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