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Consider four projects, which you expect to generate the following cash flows: Year                      Project A      &nbs

Consider four projects, which you expect to generate the following cash flows:

Year                      Project A        Project B                Project C                Project D

0                         (200,000)               (2,000)                 (200,000)               (200,000)

1                          210,000                 18,000                  100,000                   90,000

2                      (100,000 is for project c & d ONLY)    100,000                100,000

3                                                                                      100,000                115,000

,

Your required return on all of the investments is 8%. For each project estimate the Payback Period, Internal Rate of Return (IRR), and Net Present Value (NPV). If these projects are independent which should you undertake? If the investments are mutually exclusive which should you accept?

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2 Computation of NPV Present value viii-ii v Project C Cumulative cash flow vi-iv Project A vii-ii v Project B iv ix-ivv vii-i v vii-iiix-ivv 5 Year Project A Project Project Project D 2000 -200000 200000 18000 100000 90000 100000 100000 100000 115000 PVIF @ 8% Project D Project A Project B ProjectProject D 0 200000 1 210000 1.0000 (200,000.00) 2,000.00) 200,000.00) 200,000.00) 0.9259 194,44444 16,666.67 0.8573 0.7938 92,592.59 85,733.88 79,383.27 57,709.70 83,333.33 85,733.88 91,290.71 60,357.9.2 (200,000.00) (2,000.00) (200,000.00) (200,000.00) 10,000.00 16,000.00 100,000.00) 110,000.00) (10,000.00) 10,000.00 16,000.00 100,000.00 105,000.00 16,000.00 (200,000.00) 215,000.00) 10,000.00 16,000.00 10 5,555.56) 14,666.67 12 13 14 15 16 17 18 19 NPV Computation of IRR Formula 5555.56 14666.67 Project C 57709.70 tD6U35/.92 Project Project B Project C 5.00%,-IRRI B&R9 800.00%|-| R RICE:C9) 23.38-IRRIDG:D9) 23.34%)-H Kleb:E92 Computation ot If these projects are independent which should you undertake: Project B, C and D will he accepted as these has positive NPV If the investments are mutually exclusive which should you accept. Project D will be accepted as it has highest NPV @ 8% rate. Project A |=0+(200000210000) Project B |-ot(2000/180°0) 0.95 year 0.11 year 21 2.00 10000/115000 23 Project D 2.09

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