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Newfoundland Vintners Co-operative is considering two mutually exclusive projects: Absinth and Brandy. Project Absinth requires a...

Newfoundland Vintners Co-operative is considering two mutually exclusive projects: Absinth and Brandy. Project Absinth requires a $20,000 cash outlay today and is expected to generate after-tax cash flows of $11,000 in year 1, $8,500 in year 2, and $7,500 in year 3. Project Brandy requires a $30,000 cash outlay today and is expected to generate after-tax cash flows of $7,000 in year 1, $9,000 in year 2, $11,000 in year 3, and $16,000 in year 4. Neither project can be repeated at the end of its life. The appropriate discount rate for both projects is 10 percent.

  1. Calculate the NPV of both projects.
  2. Calculate the IRR of both projects.
  3. Calculate the payback periods of both projects.
  4. Calculate the discounted payback periods of both projects
  5. Calculate the profitability index of both projects.
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