Question

Al techniques-Decision among mutually exclusive investments Pound Industries is attempting to select the best of three mutually exclusive projects. The initial investment and after-tax cash inflows associated with these projects are shown in the following table. Cash flows Initial investment (CF) Cash inflows (CF), t= 1 to 5 Project A $60,000 $20,000 Project B $100,000 $31,500 Project C $90,000 $32,000 a. Calculate the payback period for each project. b. Calculate the nel present value (NPV) of each project, assuming that the firm has a cost of capital equal to 12% C. Calculate the internal rate of return (IRR) for each project. d. Indicate which project you would recommend. 179 a. The payback period of project Ais years. (Round to two decimal places.)
please answer parts A,B,C,D

Answer 1

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

B D E -Nm Year 1 Project A $60,000 $20,000 $20,000 $20,000 $20,000 $20,000 3.00 $12,095.52 19.86% Project B -$100,000 $31,500 $31,500 $31,500 $31,500 $31,500 3.17 $13,550.45 17.34% Project C -$90,000 $32,000 $32,000 $32,000 $32,000 $32,000 2.81 $25,352.84 22.85% 4 Payback period in years NPV (at 12%) IRR | 12 c. | 14 d. 2 3 Rank based on Payback Rank based on NPV Rank based on IRR Recommeded Project Project-C

Cell reference -

-NME WN Year Project A Project B Project C -60000 -100000 -90000 20000 31500 32000 20000 31500 32000 20000 31500 32000 4 20000 31500 32000 20000 31500 32000 Payback period in years =-C4/C5 =-D4/D5 =-E4/E5 NPV (at 12%) =NPV(12%,C5:09)+C4 =NPV(12%,D5:09)+D4 =NPV(12%, E5:E9)+E4 IRR =IRR(C4:09) =IRR(D4:D9) =IRR(E4:E9) a. b. 12 C. d. 2 Rank based on Payback Rank based on NPV Rank based on IRR 2 2 Recommeded Project Project-C

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