Question

There are 2 projects in the intake process. There is only enough financial capital available to do 1 of the 2, though it might later be possible to do the other one.   The company is also concerned with cash flow. Finally, the organization has given a weight of 50 to project 1 and 60 for project 2, in terms of how likely each project might increase market penetration for these markets served by what each project provides.

Knowing the above, and having the data in the table below, create a weighted scoring model (create it in a Spreadsheet, like MS-Excel, but post a screenshot of it into the MS-Word file you submit) to help the portfolio governance committee select a project, as well as to see the weighting info for the non-selected projects.

Project 1

Rate of return = 10%

	Year 1	Year 2	Year 3
Projected net cash flow:	$15,000	$25,000	$30,000
Cost to develop:	$50,000

Project 2

Rate of return = 10%

	Year 1	Year 2	Year 3
Projected net cash flow:	$10,000	$30,000	$26,000
Cost to develop:	$48,000

1. Determine the NPV of each of the 2 projects

2. Determine the payback period for each of the 2 projects (averaging the cash flows is acceptable here)

Answer 1

yr Project 1. Cash Inlow (Discounted) Income PUF (10%) 15000 0.9091 26000 0.8264 300 00 0.7513 7000 o Cash Inglow 13636.5 20660 22539 56835.5 Cash outflow = $50,000 NPV = Cash Inflow - Cash outh low = 56835.5 - 50000 = 6835.5 Payback period - Initial investment Average Income Average Income = 15000 25000 + 30000 = 70000 کی = 23,333.33 Payback period = 50000 = 2.14 years. 23333.33 cs Scanned with CamScanner

PUF (10%) 0.9091 we - Project 2 Disc Cash flow Income Disc Cashflow 10000 9091 30000 0.8264 24792 26000 0.7513 19533.8 66000 53416.8 Cash outflow = $48000 NPV = 53416.8 - 48000 = $5416.8 Average Income - 10000 + 30000 + 26000 - 66000 = $22000 layback period = 48000 22000 = 2.18 years. $6835.5 $ 54.16 5416.8. (a) NPV of Project 1 - Project 2 - (6) Payback Project I - Project 2 & 2.14 years 2.18 years [cs Scanned with CamScanner