Question

All​ techniques, conflicting rankings

Nicholson Roofing​ Materials, Inc., is considering two mutually exclusive​ projects, each with an initial investment of ​$100,000. The​ company's board of directors has set a​ 4-year payback requirement and has set its cost of capital at 8​%. The cash inflows associated with the two projects are shown in the following​ table(In the photo):

a. Calculate the payback period for each project. Rank the projects by payback period.

b.  Calculate the NPV of each project. Rank the project by NPV.

c.  Calculate the IRR of each project. Rank the project by IRR.

d.  Make a recommendation.

Cash inflows (CF) Project A $30,000 $30,000 $30,000 $30,000 $30,000 $30,000 Project B $85,000 $70,000 $0 $0 $0 $0 Year 4

Answer 1

PvE@s-L Do TTTc.. 8333 &4999 3 30,ooo o 680 5 So,ooo 80,oo6o' 、63 8906 O.30 10,044 Payb 3四四00 LRR 26 38,684 38,68u CA) 88,9 l0

e s Ceum.cels Pxcaah, DceErFaar DCe to3 2, 2-6 8-8397. Pa NPV ef. 662 38113

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